Research On The Relationship Between Liquidity And Trading Volume And Volatility Of Shanghai Copper Futures Under High Frequency Data

Volatility is one of the important attributes of financial assets.Whether in financial asset allocation,financial product pricing,or risk management,the estimation of volatility and the study of the causes of volatility are crucial,because the accuracy of volatility forecast estimates is higher.The research and application will have better results.In the financial market,the futures market has a pivotal position to provide participants with investment,hedging and speculation.Fluctuations in commodity futures prices,especially changes in the price of non-ferrous metals,have a major impact on industrial manufacturing and its operations,policy development,and the formulation of financial trading portfolio strategies and risk management.This article will use the copper futures of Shanghai Futures Trading as the object of researching volatility.And the copper futures is already one of the main market conditions of global copper futures trading.So the copper futures is representative.And more realistic guiding significance.Through the research and practice in the stock and futures market and the feedback from the market participants,the author finds that the volume and the liquidity in the market have certain influence in futures market volatility.Liquidity plays a key role in financial markets,which is crucial for the operation of financial markets and the allocation of resources;the volume of financial assets has an impact on its own price changes.This paper will use the volume and liquidity indicators to conduct empirical research on volatility,in order to find the possible correlation between trading volume,liquidity and volatility.With the deepening of academic research,it is found that the time series of high frequency data contains information lost in low frequency data.So the paper uses high-frequency data for research.In reviewing the existing literature,it is found that the heterogeneous autoregressive model(HAR model)can better process high frequency data,and the heterogeneous autoregressive model is more in line with the characteristics of domestic financial market heterogeneity.Therefore,we will use the heterogeneous autoregressive model to study the realized volatility under high frequency data.In this paper,the Shanghai Futures Exchange’s copper commodity futures 5-minute high-frequency price data will be used to calculate the realized volatility,and the calculation includes the volatility of the required period of the HAR model.This paper also divides the realized volatility sequence of the benefit time series into a form with jump components and a continuous component.Then,by using the HAR family model,the model of the realized volatility sequence and the corresponding liquidity proxy variables and volume are respectively established.Whether the HAR model can better predict the volatility and whether the liquidity or volume will increase the predictive performance,this is the focus of this paper.Adding liquidity Indicators and volume based on high frequency data and HAR model.to study the volatility of the copper commodity futures,and explore the relationship between volatility and its liquidity and volume.Based on the research and analysis,the paper concludes that under the condition of 5 minutes high frequency data of Shanghai copper commodity futures,and the HAR model,it is found that there is significance in the prediction of volatility after adding liquidity index and volume index to the model.It indicates that them contain certain incremental information.In particular,the volume index enhances the prediction effect of the HAR model to study volatility,especially the prediction of volatility in short time periods.