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An empirical study of volatility and market quality

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posted on 29.03.2022, 03:36 authored by Chen Yu Yan
The aim of this study is to develop a simplified tool to measure pricing efficiency using volatility from price. Volatility is a major aspect of today’s markets and is considered a quintessential aspect that is rooted within practical applications of trading, investing, compliance, and risk management. Current developments and research concerning asset pricing incorporates the factors of market quality and liquidity, which can be reflected through volatility. What can be determined is whether public information derived from end of day pricing can be used to infer the market quality within a short time-frame. This study investigates over 2,000 active trading accounts from a leading broker, and concludes that information derived from volatility can act as a short term predictor of market risk. Within this framework, volatility is seen to be highly correlated with the number of margin calls and liquidations. This can serve as an objective indicator of market quality in general when used by risk management and traders alike during decision making processes.

History

Table of Contents

1. Introduction -- 2. Factors of volatility and market efficiency -- 3. Hypotheses -- 4. Data and methodology -- 5. Results -- 6. Application -- 7. Conclusion -- 8. Bibliography -- Appendix.

Notes

Bibliography: pages 32-34 Empirical thesis.

Awarding Institution

Macquarie University

Degree Type

Thesis MRes

Degree

MRes, Macquarie University, Faculty of Business and Economics, Macquarie Graduate School of Management

Department, Centre or School

Macquarie Graduate School of Management

Year of Award

2016

Principal Supervisor

Andrew Lepone

Rights

Copyright Chen Yu Yang 2016. Copyright disclaimer: http://mq.edu.au/library/copyright

Language

English

Extent

1 online resource (iv, 39 pages) graphs, tables

Former Identifiers

mq:69695 http://hdl.handle.net/1959.14/1256838