The information content of open interest for the realized range-based volatility: evidence from Chinese futures market

Abstract

Purpose -The paper studies the impact of the infroamtion content of open interst on the realized range-based vaolatility of Chinese futures markets. Methodology-We employ a hybrid range-based estimator to measure the integrated variance in the heterogeneous autoregressive (HAR) model, which also incorporates the variable of open interest into the HAR model on index futures prices of China Securities Index (CSI) 300. Findings-Our findings demonstrate that the variable of open interest has a significant explanatory power with regard to the future realized volatility of the CSI 300 index futures. Conclusion-The modified model enhances volatility forecasting performance, thereby indicating it has more accurate predictive power. Our results provide supports for the implication of the sequential information arrival hypothesis.

Analysis of Volatility Volume and Open Interest for Nifty Index Futures Using GARCH Analysis and VAR Model

“…Furthermore, positive unexpected volume shocks on volatility are larger than the impact of negative shocks, and large open interest lessens volatility. Tseng et al (2018) state that open interest has significant explanatory power with regard to futures' realized volatility for CSI 300 Index futures. Ferris et al (2002) opines that the level of open interest is a good proxy for examining the capital flows into and out of the nearest S&P 500 index futures contract.…”