Abstract
Using daily stock return data for individual stocks from an emerging economy, this article examines the relationship between return volatility and trading volume under the theoretical postulate of the mixture of distributions hypothesis. The results suggest that the contemporaneous trading volume as a proxy for latent information arrival to the market did not contribute to the removal of significant ARCH or Generalized Autoregressive Conditional Heteroscedasticity effects that are found in stocks at the first stage of the investigation. The same holds for the lagged volume except for one case. This, perhaps, suggests that the trading volume (contemporaneous or lagged) is not adequately conveying information to induce traders’ views of the desirability of trade and, therefore, points to the need for searching for other micro and macro variables to be used as potential proxy for information arrival to the stock market of the emerging economy.
| Original language | English |
|---|---|
| Pages (from-to) | 1899-1908 |
| Number of pages | 10 |
| Journal | Applied Economics |
| Volume | 47 |
| Issue number | 18 |
| DOIs | |
| Publication status | Published - Apr 15 2015 |
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Keywords
- ARCH and GARCH effects
- emerging economy
- mixture of distributions hypothesis
- stock return volatility
- trading volume
ASJC Scopus subject areas
- Economics and Econometrics
Cite this
Examining the relationship between stock return volatility and trading volume : new evidence from an emerging economy. / Bose, Shekar; Rahman, Hafizur.
In: Applied Economics, Vol. 47, No. 18, 15.04.2015, p. 1899-1908.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Examining the relationship between stock return volatility and trading volume
T2 - new evidence from an emerging economy
AU - Bose, Shekar
AU - Rahman, Hafizur
PY - 2015/4/15
Y1 - 2015/4/15
N2 - Using daily stock return data for individual stocks from an emerging economy, this article examines the relationship between return volatility and trading volume under the theoretical postulate of the mixture of distributions hypothesis. The results suggest that the contemporaneous trading volume as a proxy for latent information arrival to the market did not contribute to the removal of significant ARCH or Generalized Autoregressive Conditional Heteroscedasticity effects that are found in stocks at the first stage of the investigation. The same holds for the lagged volume except for one case. This, perhaps, suggests that the trading volume (contemporaneous or lagged) is not adequately conveying information to induce traders’ views of the desirability of trade and, therefore, points to the need for searching for other micro and macro variables to be used as potential proxy for information arrival to the stock market of the emerging economy.
AB - Using daily stock return data for individual stocks from an emerging economy, this article examines the relationship between return volatility and trading volume under the theoretical postulate of the mixture of distributions hypothesis. The results suggest that the contemporaneous trading volume as a proxy for latent information arrival to the market did not contribute to the removal of significant ARCH or Generalized Autoregressive Conditional Heteroscedasticity effects that are found in stocks at the first stage of the investigation. The same holds for the lagged volume except for one case. This, perhaps, suggests that the trading volume (contemporaneous or lagged) is not adequately conveying information to induce traders’ views of the desirability of trade and, therefore, points to the need for searching for other micro and macro variables to be used as potential proxy for information arrival to the stock market of the emerging economy.
KW - ARCH and GARCH effects
KW - emerging economy
KW - mixture of distributions hypothesis
KW - stock return volatility
KW - trading volume
UR - http://www.scopus.com/inward/record.url?scp=84922247362&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84922247362&partnerID=8YFLogxK
U2 - 10.1080/00036846.2014.1002885
DO - 10.1080/00036846.2014.1002885
M3 - Article
AN - SCOPUS:84922247362
VL - 47
SP - 1899
EP - 1908
JO - Applied Economics
JF - Applied Economics
SN - 0003-6846
IS - 18
ER -