Order Flow and Volatility: An Empirical Investigation

Journal of Empirical Finance, Vol. 28, 2014

Tinbergen Institute Discussion Paper No. 2011-077/4

40 Pages Posted: 23 May 2011 Last revised: 16 Dec 2016

See all articles by Anne Opschoor

Anne Opschoor

Vrije Universiteit Amsterdam

Nicholas Taylor

University of Bristol - School of Economics, Finance and Management

Michel van der Wel

Erasmus University Rotterdam; CREATES; ERIM; Tinbergen Institute

Dick J. C. van Dijk

Erasmus University Rotterdam - Erasmus School of Economics - Econometric Institute; ERIM

Date Written: May 19, 2014

Abstract

We study the relationship between order flow and volatility. To this end we develop a comprehensive framework that simultaneously controls for the effects of macro announcements and order flow on prices and the effect of macro announcements on volatility. Using high-frequency 30-year U.S. Treasury bond futures data, we find a statistically and economically significant relationship between the absolute value of order flow and volatility. Moreover, this relationship is robust, inter alia, to a number of factors including the introduction of liquidity effects, use of data measured over a different frequency, and market conditions.

Keywords: Information, order flow, macroeconomic announcements, treasury futures

JEL Classification: G14, E14

Suggested Citation

Opschoor, Anne and Taylor, Nicholas and van der Wel, Michel and van Dijk, Dick J.C., Order Flow and Volatility: An Empirical Investigation (May 19, 2014). Journal of Empirical Finance, Vol. 28, 2014, Tinbergen Institute Discussion Paper No. 2011-077/4 , Available at SSRN: https://ssrn.com/abstract=1840611 or http://dx.doi.org/10.2139/ssrn.1840611

Anne Opschoor (Contact Author)

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, NL 1081 HV
Netherlands

Nicholas Taylor

University of Bristol - School of Economics, Finance and Management ( email )

United Kingdom

Michel Van der Wel

Erasmus University Rotterdam ( email )

Burg. Oudlaan 50
Rotterdam, NL 3062 PA
Netherlands

CREATES ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

ERIM ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Dick J.C. Van Dijk

Erasmus University Rotterdam - Erasmus School of Economics - Econometric Institute

P.O. Box 1738
3000 DR Rotterdam
Netherlands

ERIM ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1263 (Phone)
+31 10 4089162 (Fax)

HOME PAGE: http://people.few.eur.nl/djvandijk

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