Order Flow and Volatility: An Empirical Investigation

A (Anne) Opschoor; Michel van der Wel; Dick van Dijk; N Taylor

doi:10.1016/j.jempfin.2014.07.002

Order Flow and Volatility: An Empirical Investigation

A (Anne) Opschoor, Michel van der Wel, Dick van Dijk, N Taylor

Research output: Contribution to journal › Article › Academic › peer-review

13 Citations (Scopus)

Abstract

We study the relationship between order flow and volatility. To this end we develop a comprehensive framework that simultaneously controls for the effects of macro announcements and order flow on prices and the effect of macro announcements on volatility. Using high-frequency 30-year U.S. Treasury bond futures data, we find a statistically and economically significant relationship between the absolute value of order flow and volatility. Moreover, this relationship is robust, inter alia, to a number of factors including the introduction of liquidity effects, use of data measured over a different frequency, and market conditions.

Original language	English
Pages (from-to)	185-201
Number of pages	17
Journal	Journal of Empirical Finance
Volume	28
DOIs	https://doi.org/10.1016/j.jempfin.2014.07.002
Publication status	Published - 2014

Research programs

EUR ESE 31
EUR ESE 33

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10.1016/j.jempfin.2014.07.002

http://hdl.handle.net/1765/69194

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title = "Order Flow and Volatility: An Empirical Investigation",

abstract = "We study the relationship between order flow and volatility. To this end we develop a comprehensive framework that simultaneously controls for the effects of macro announcements and order flow on prices and the effect of macro announcements on volatility. Using high-frequency 30-year U.S. Treasury bond futures data, we find a statistically and economically significant relationship between the absolute value of order flow and volatility. Moreover, this relationship is robust, inter alia, to a number of factors including the introduction of liquidity effects, use of data measured over a different frequency, and market conditions.",

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journal = "Journal of Empirical Finance",

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AU - Opschoor, A (Anne)

AU - van der Wel, Michel

AU - van Dijk, Dick

AU - Taylor, N

PY - 2014

Y1 - 2014

N2 - We study the relationship between order flow and volatility. To this end we develop a comprehensive framework that simultaneously controls for the effects of macro announcements and order flow on prices and the effect of macro announcements on volatility. Using high-frequency 30-year U.S. Treasury bond futures data, we find a statistically and economically significant relationship between the absolute value of order flow and volatility. Moreover, this relationship is robust, inter alia, to a number of factors including the introduction of liquidity effects, use of data measured over a different frequency, and market conditions.

AB - We study the relationship between order flow and volatility. To this end we develop a comprehensive framework that simultaneously controls for the effects of macro announcements and order flow on prices and the effect of macro announcements on volatility. Using high-frequency 30-year U.S. Treasury bond futures data, we find a statistically and economically significant relationship between the absolute value of order flow and volatility. Moreover, this relationship is robust, inter alia, to a number of factors including the introduction of liquidity effects, use of data measured over a different frequency, and market conditions.

U2 - 10.1016/j.jempfin.2014.07.002

DO - 10.1016/j.jempfin.2014.07.002

M3 - Article

SN - 0927-5398

VL - 28

SP - 185

EP - 201

JO - Journal of Empirical Finance

JF - Journal of Empirical Finance

ER -

Order Flow and Volatility: An Empirical Investigation

Abstract

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