Endogenous Trading Volume and Momentum in Stock-Return Volatility.

This paper examines the ability of volume data to shed light on the source of persistence in stock-return volatility. A mixture model, in which a latent common factor restricts the joint density of volumes and returns, is used to relax the assumption of exogenous volume used in previous studies. The authors use a point-in-time signal-extraction procedure to identify this latent process and a calibrated simulation to conduct analysis of the viability of the model to explain important properties of the data. Using daily returns and volume on individual stocks, their procedure cannot accommodate serial dependence in squared returns.