{"title":"Realized higher moments and trading activity","authors":"Shu-Fang Yuan","doi":"10.1007/s11156-023-01227-3","DOIUrl":null,"url":null,"abstract":"<p>This study investigates the informativeness of realized higher moments of stock index returns, namely, realized skewness and kurtosis, in explaining trading activity in the futures market to investigate whether information flows from price risk to trading activity. By analyzing high-frequency data covering a twelve-year period, we discover that futures trading activity can be attributed to high-moment market risks, as observed in the significant explanatory power of realized high moments even after controlling for other risk factors. The results are robust to the use of various adjusted measures of high-moment risk, their subcomponents, various measures of trading activity, and data attributes. This study suggests that realized high moments are a market risk and cannot be combined with volatility risk and other risk measures. Most importantly, this study finds that there exists a flow of market information from price risk to trading activity.</p>","PeriodicalId":47688,"journal":{"name":"Review of Quantitative Finance and Accounting","volume":"86 1","pages":""},"PeriodicalIF":1.9000,"publicationDate":"2023-12-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Review of Quantitative Finance and Accounting","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1007/s11156-023-01227-3","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This study investigates the informativeness of realized higher moments of stock index returns, namely, realized skewness and kurtosis, in explaining trading activity in the futures market to investigate whether information flows from price risk to trading activity. By analyzing high-frequency data covering a twelve-year period, we discover that futures trading activity can be attributed to high-moment market risks, as observed in the significant explanatory power of realized high moments even after controlling for other risk factors. The results are robust to the use of various adjusted measures of high-moment risk, their subcomponents, various measures of trading activity, and data attributes. This study suggests that realized high moments are a market risk and cannot be combined with volatility risk and other risk measures. Most importantly, this study finds that there exists a flow of market information from price risk to trading activity.
期刊介绍：
Review of Quantitative Finance and Accounting deals with research involving the interaction of finance with accounting, economics, and quantitative methods, focused on finance and accounting. The papers published present useful theoretical and methodological results with the support of interesting empirical applications. Purely theoretical and methodological research with the potential for important applications is also published. Besides the traditional high-quality theoretical and empirical research in finance, the journal also publishes papers dealing with interdisciplinary topics.
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