The effects of trading activity on market volatility

  title={The effects of trading activity on market volatility},
  author={Giampiero M. Gallo and Barbara Pacini},
  journal={The European Journal of Finance},
  pages={163 - 175}
The paper re-examines the question of excessive implied persistence of volatility estimates when GARCH type models are used. Ten actively traded US stocks are considered and as already established in the literature, when volume traded is inserted in the GARCH (1, 1) or (EGARCH 1, 1) models for returns, the estimated persistence is decreased. Since volume is affected also by within-the-day price movements and hence is not weakly exogenous relative to returns, alternative proxies for trading… 
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Chapter 49 Arch models