Bayesian modeling of financial returns: A relationship between volatility and trading volume |
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| Authors: | Carlos A. Abanto‐Valle Helio S. Migon Hedibert F. Lopes |
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| Affiliation: | 1. Instituto de Matemática, Universidade Federal do Rio de Janeiro, Brazil;2. The University of Chicago Booth School of Business, U.S.A. |
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| Abstract: | 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. |
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| Keywords: | stochastic volatility nonlinear and non‐Gaussian state space models Markov process of first order Markov chain Monte Carlo |
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