Heteroskedasticity in the returns of the main world stock exchange indices: volume versus GARCH effects

This study re-examines the results of [Lamoureax, C.G., Lastrapes, W.D., 1990. Heteroskedasticity in stock return data: volume versus GARCH effects. Journal of Business & Economic Statistics (2), 253-260]. Lamoureux and Lastrapes (1990) analyzing the persistence of GARCH effects on the return of nine international stock exchange indices. The result in all markets shows that the inclusion of trading volume does not substantially reduce the persistence of conditional volatility. This coincidence in results enables us to support the argument of [Sharma, J.L., Mougoue, M., Kamath, R., 1996. Heteroscedasticity in stock market indicator return data: volumen versus GARCH effects. Applied Financial Economics (6), 337-342] that, in market return, macroeconomic factors prevail over those of particular companies. Unexpected trading volume is used as a proxy variable for the information flow rate. Even though this variable is unable to reduce GARCH effects, its greater impact on volatility suggests that this is not so much affected by the level of market activity but rather by unexpected changes in this level.