We use state-space methods to investigate the relation between volume, volatility, and ARCH effects within a mixture of distributions hypothesis (MDH) framework. Most recent studies of the MDH fit AR(1) specifications that require the information flow to be highly persistent. Using a more...

We find that trading- versus nontrading-period variance ratios in weather-sensitive markets are lower than those in the equity market and higher than those in the currency market. The variance ratios are also substantially lower during periods of the year when prices are most sensitive to the...

A number of studies investigate whether various stochastic variables explain changes in return volatility by specifying the variables as covariates in a GARCH(1, 1) or EGARCH(1, 1) model. The authors show that these models impose an implicit constraint that can obscure the true role of the...