Heteroscedasticity in stock returns data revisited: volume versus GARCH effects

Abstract

The results of Lamoureux and Lastrapes (Journal of Finance, 45, 221-29, 1990) are extended to the UK stock market, and the study examines, in particular, their finding that GARCH modelling captures the serial dependence in volume of trade. Using data on 50 UK companies, we find that although the parameter estimates of the GARCH model become insignificant when volume of trade is used in the conditional variance of returns, the autocorrelations of the squared residuals still exhibit a highly significant GARCH effects. Evidence is found that there is a strong association in the timing of innovational outliers in returns and volume. The results suggest that a threshold model for volume and returns could prove a useful route to pursue in future research.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 76 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.