VOLUME, VOLATILITY, AND LEVERAGE - A DYNAMIC ANALYSIS

This paper uses dynamic impulse response analysis to investigate the i nterrelationships among stock price volatility, trading volume, and th e leverage effect. Dynamic impulse response analysis is a technique fo r analyzing the multi-step-ahead characteristics of a nonparametric es timate of the one-step conditional density of a strictly stationary pr ocess. The technique is the generalization to a nonlinear process of S ims-style impulse response analysis for linear models. In this paper, we refine the technique and apply ii to a long panel of daily observat ions on the price and trading volume of four stocks actively traded on the NYSE: Boeing, Coca-Cola, IBM, and MMM.