Order flow and volatility: An empirical investigation

A. Opschoor, N. Taylor, M. van der Wel, D. van Dijk

Research output: Contribution to JournalArticleAcademicpeer-review

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. © 2014 Elsevier B.V.
Original languageEnglish
Pages (from-to)185-201
JournalJournal of Empirical Finance
Volume28
Issue numberSeptember
DOIs
Publication statusPublished - 2014

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