Futures trading volume as a determinant of prices in different momentum phases

Hodgson, Allan, Masih, A. Mansur M. and Masih, Rumi (2006) Futures trading volume as a determinant of prices in different momentum phases. International Review of Financial Analysis, 15 1: 68-85. doi:10.1016/j.irfa.2004.10.014

Author Hodgson, Allan
Masih, A. Mansur M.
Masih, Rumi
Title Futures trading volume as a determinant of prices in different momentum phases
Journal name International Review of Financial Analysis   Check publisher's open access policy
ISSN 1873-8079
Publication date 2006
Year available 2004
Sub-type Article (original research)
DOI 10.1016/j.irfa.2004.10.014
Volume 15
Issue 1
Start page 68
End page 85
Total pages 18
Place of publication Amsterdam, Netherlands
Publisher Elsevier BV
Language eng
Abstract Recent studies contend that trading volume has predictive power for ex ante stock prices, particularly small stocks that do not react quickly to macroeconomic information. This study postulates that a significant amount of macro-information that flows on to stock markets is derived from derivative markets. We examine the impact of short-term futures trading volume and prices on cash stock prices using a case study of 15-min data from the Australian stock index futures market which reports actual trading volume. After applying vector error correction modelling (VECM), variance decomposition and impulse functions, we conclude that futures prices provide a short-term information lead to stock prices that dominates trading volume effects. We also observe asymmetric changes in the impact of trading volume between bull and bear price momentum phases and after large trading volume shocks. These results suggest that, in future, studies on trading volume should control for the cross-correlation impact from derivative prices and the differential impact of trading phases. © 2004 Elsevier Inc. All rights reserved.
Keyword Futures trading volume
Stock and futures prices
Multivariate causality
Price momentum phases
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Unknown
Additional Notes Available online 25 November 2004

Document type: Journal Article
Sub-type: Article (original research)
Collection: UQ Business School Publications
Version Filter Type
Citation counts: Scopus Citation Count Cited 9 times in Scopus Article | Citations
Google Scholar Search Google Scholar
Created: Wed, 02 Mar 2011, 10:36:17 EST by Karen Morgan on behalf of UQ Business School