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CN 11-3979/C
GONG Lan-jie. Research on the Relationship between Liquidity and Volatility[J]. Journal of Beijing University of Aeronautics and Astronautics Social Sciences Edition, 2009, 22(2): 14-16.
Citation: GONG Lan-jie. Research on the Relationship between Liquidity and Volatility[J]. Journal of Beijing University of Aeronautics and Astronautics Social Sciences Edition, 2009, 22(2): 14-16.
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Research on the Relationship between Liquidity and Volatility

  • School of Management, Tianjin University, Tianjin 300072, China

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  • Received Date: December 03, 2007
  • Published Date: June 24, 2009
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    • Abstract
  • This paper establishes a model of duration, spread and volatility based on irreg ular time series to find out the relationship between liquidity and volatility. The result suggests that the two measurements of transaction frequency and trans action cost for liquidity and volatility interact significantly. So the manageme nt should reduce the transaction costs to prevent extreme volatility, supply eno ugh liquidity and keep the price stable.
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    • References (6)
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    [2] Kyle A S. Continuous Auctions and Insider Trading[J]. Econometrica, 1985, 53: 1315-1335.
    [3] Engle R F, Russell J. Autoregressive Conditional Duration: A New Mode l for Irregularly Spaced Transaction Data[J]. Econometrica,2000,66: 1127-1162 .
    [4] Engle R F. The Econometrics of Ultra High Frequency Data[J]. Econom etrica,2000,68: 1-22.
    [5] Simone Manganelli. Duration, Volume and Volatility Impact of Trades . Journal of Financial Markets,2005, 8:377-399.
    [6] Andersen T G, Bollerslev T. Intraday Periodicity and Volatility Persi stence in Financial Markets[J]. Empirical Finance,1997,(4): 115-158.
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