Tests for Cointegration Breakdown Over a Short Time Period

We derive a speculative trading model with endogenous informed trading that yields a conditionally heteroscedastic time series for trading volume and the squared price changes. We use half-hourly price-change and volume data for IBM during 1988 to test the model and estimate the structural parameters using the simulated method-of-moments estimation procedure. Although the model seems to do a reasonable job fitting the unconditional moments of the volume and the squared price change processes, it fares less well in fitting the relation between current trading volume and lags of trading volume and squared volume's (and its lag's) relation to squared price changes.