John M. Olin School of Business, Washington University and Department of Economics, College of Business Administration, Louisiana State University, respectively. This work was completed while Lamoureux was at Louisiana State University. This paper has benefitted from the comments of seminar participants at LSU and Washington University. We are especially grateful to Richard T. Baillie, Frank Diebold, Phil Dybvig, Rob Engle, Clive Granger, Mel Jameson, Ken Kroner, Chowdhury Mustafa, David Mayers (the co-editor), Percy Poon, Mike Salemi, Gary Sanger, George Tauchen, and an anonymous referee. All errors remain ours.
Heteroskedasticity in Stock Return Data: Volume versus GARCH Effects
Article first published online: 30 APR 2012
1990 The American Finance Association
The Journal of Finance
Volume 45, Issue 1, pages 221–229, March 1990
How to Cite
LAMOUREUX, C. G. and LASTRAPES, W. D. (1990), Heteroskedasticity in Stock Return Data: Volume versus GARCH Effects. The Journal of Finance, 45: 221–229. doi: 10.1111/j.1540-6261.1990.tb05088.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
This paper provides empirical support for the notion that Autoregressive Conditional Heteroskedasticity (ARCH) in daily stock return data reflects time dependence in the process generating information flow to the market. Daily trading volume, used as a proxy for information arrival time, is shown to have significant explanatory power regarding the variance of daily returns, which is an implication of the assumption that daily returns are subordinated to intraday equilibrium returns. Furthermore, ARCH effects tend to disappear when volume is included in the variance equation.