The causality between liquidity and volatility in the Polish stock market

Barbara Będowska-Sójka , Agata Kliber

Abstract

We study dependencies between liquidity and volatility in the causality framework for stocks listed on the Warsaw Stock Exchange. Using Toda-Yamamoto and Granger causality tests we find bidirectional causality between the measures. The causal liquidity-volatility relation is more often observed than volatility-liquidity one, and both relations are frequently asymmetric. The directional spillover index suggests, that the fraction of forecast error variance due to the shock in other measure is much smaller than the response to own shocks. The choice of proxies matters: among different alternatives we find that high-low range is most often Granger cause for volatility.
Author Barbara Będowska-Sójka (WIiGE / KE)
Barbara Będowska-Sójka,,
- Department of Econometrics
, Agata Kliber (WIiGE / KMS)
Agata Kliber,,
- Department of Applied Mathematics
Journal seriesFinance Research Letters, ISSN 1544-6123, e-ISSN 1544-6131, (N/A 70 pkt)
Issue year2019
Vol30
Pages110-115
Publication size in sheets0.5
Keywords in Polishzmienność, wariancja warunkowa, zmienność zrealizowana, przyczynowość w sensie Grangera
Keywords in EnglishVolatility; Conditional variance; Realized variance; Illiquidity; Range; Granger causality
ASJC Classification2003 Finance
DOIDOI:10.1016/j.frl.2019.04.008
URL https://www.sciencedirect.com/science/article/abs/pii/S1544612318307062
Languageen angielski
Score (nominal)70
Score sourcejournalList
ScoreMinisterial score = 70.0, 03-04-2020, ArticleFromJournal
Publication indicators WoS Citations = 0; Scopus SNIP (Source Normalised Impact per Paper): 2018 = 0.854; WoS Impact Factor: 2017 = 1.085 (2) - 2017=1.087 (5)
Citation count*9 (2020-07-01)
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