Order flow and volatility: An empirical investigation

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

doi:10.1016/j.jempfin.2014.07.002

Order flow and volatility: An empirical investigation

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

Finance

Research output: Contribution to Journal › Article › Academic › peer-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 language	English
Pages (from-to)	185-201
Journal	Journal of Empirical Finance
Volume	28
Issue number	September
DOIs	https://doi.org/10.1016/j.jempfin.2014.07.002
Publication status	Published - 2014

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10.1016/j.jempfin.2014.07.002

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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. {\textcopyright} 2014 Elsevier B.V.",

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AU - van der Wel, M.

AU - van Dijk, D.

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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. © 2014 Elsevier B.V.

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DO - 10.1016/j.jempfin.2014.07.002

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JO - Journal of Empirical Finance

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