Title: Volume weighted volatility: empirical evidence for a new realised volatility measure

Authors: Chaiyuth Padungsaksawasdi; Robert T. Daigler

Addresses: Department of Finance, Thammasat Business School, Thammasat University, Bangkok, 10200, Thailand ' Department of Finance, College of Business Administration, Florida International University, Miami, Florida 33199, USA

Abstract: We introduce a new conceptually superior realised volatility estimator, volume weighted volatility (VWV), which effectively measures demand-based volatility, rather than only measuring the variability of a price series. We compare the VWV to other return- and range-based measures using the stock index futures, with our results supporting the empirical uniqueness of VWV. First, regressions show that the VWV provides unique information. Second, VWV is (only) weakly associated with other volatility measures for the smallest four volatility quintiles. Third, correlograms illustrate that the VWV is less persistent than the other measures, leading to more unique volatility values. Finally, the VWV most closely approximates the normal distribution.

Keywords: realised volatility; volume; volume weighted average price; VWAP.

DOI: 10.1504/IJBAAF.2018.089423

International Journal of Banking, Accounting and Finance, 2018 Vol.9 No.1, pp.61 - 87

Accepted: 08 Jul 2017
Published online: 23 Jan 2018 *

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