Examining the relationship between stock return volatility and trading volume: new evidence from an emerging economy

Shekar Bose, Hafizur Rahman

Research output: Contribution to journalArticle

4 Citations (Scopus)

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 languageEnglish
Pages (from-to)1899-1908
Number of pages10
JournalApplied Economics
Volume47
Issue number18
DOIs
Publication statusPublished - Apr 15 2015

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Stock return volatility
Emerging economies
Trading volume
Autoregressive conditional heteroscedasticity
Generalized autoregressive conditional heteroscedasticity
Traders
Stock returns
Mixture of distributions
Return volatility
Stock market

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 journalArticle

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