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Bayesian modeling of financial returns: A relationship between volatility and trading volume
Author(s) -
AbantoValle Carlos A.,
Migon Helio S.,
Lopes Hedibert F.
Publication year - 2009
Publication title -
applied stochastic models in business and industry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.413
H-Index - 40
eISSN - 1526-4025
pISSN - 1524-1904
DOI - 10.1002/asmb.789
Subject(s) - econometrics , stochastic volatility , volatility (finance) , markov chain monte carlo , bayesian probability , markov chain , forward volatility , economics , computer science , financial economics , artificial intelligence , machine learning
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. Copyright © 2009 John Wiley & Sons, Ltd.