Bayesian modeling of financial returns: A relationship between volatility and trading volume

Carlos A. Abanto-Valle, Helio S. Migon, Hedibert F. Lopes

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

The modified mixture model with Markov switching volatility specification is introduced to analyze the relationship between stock return volatility and trading volume. We propose to construct an algorithm based on Markov chain Monte Carlo simulation methods to estimate all the parameters in the model using a Bayesian approach. The series of returns and trading volume of the British Petroleum stock will be analyzed.

Original languageEnglish (US)
Pages (from-to)172-193
Number of pages22
JournalApplied Stochastic Models in Business and Industry
Volume26
Issue number2
DOIs
StatePublished - Mar 2010
Externally publishedYes

Keywords

  • Markov chain Monte Carlo
  • Markov process of first order
  • Nonlinear and non-Gaussian state space models
  • Stochastic volatility

ASJC Scopus subject areas

  • Modeling and Simulation
  • Business, Management and Accounting(all)
  • Management Science and Operations Research

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