Return Volatility and Trading Volume: An Information Flow Interpretation of Stochastic Volatility

@article{Andersen1996ReturnVA,
  title={Return Volatility and Trading Volume: An Information Flow Interpretation of Stochastic Volatility},
  author={Torben G. Andersen},
  journal={Journal of Finance},
  year={1996},
  volume={51},
  pages={169-204}
}
  • T. Andersen
  • Published 1 March 1996
  • Economics
  • Journal of Finance
This paper develops an empirical return volatility-trading volume model from a microstructure framework in which informational asymmetries and liquidity needs motivate trade in response to information arrivals. The resulting system modifies the so-called 'mixture of distribution hypothesis' (MDH). The dynamic features are governed by the information flow, modeled as a stochastic volatility process, and generalize standard autoregressive conditional heteroskedasticity specifications… 
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