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Price Common Volatility or Volume Common Volatility? Evidence from Taiwan's Exchange Rate and Stock Markets
Author(s) -
Chen ShyhWei,
Shen ChungHua
Publication year - 2004
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/j.1467-8381.2004.00189.x
Subject(s) - volatility (finance) , economics , volatility swap , volatility smile , financial economics , stock (firearms) , monetary economics , implied volatility , mechanical engineering , engineering
This paper investigates the common volatility structure of stock and exchange rate markets of Taiwan. The two markets are often linked together and we are interested in knowing whether price or volume is a good proxy to pursue this issue. We claim that Taiwanese government interventions distort the timing of conventional price volatility clustering in the two markets. The unrestricted trading volumes reveal more information regarding the market than price. We find that common volatility does exist in the stock and exchange markets and this fact is uncovered more easily by using trading volume than by using prices.