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Nonlinear Market Dynamics Between Stock Returns And Trading Volume: Empirical Evidences From Asian Stock Markets

Author

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  • Wu-Jen Chuang
  • Liang-Yuh Ou-Yang
  • Wen-Chen Lo

    (Graduate Institute of Money, Banking and Finance, Tamkang University, Taipei, Taiwan, R.O.C.)

Abstract

Recent empirical researches report that nonlinear dynamics is present in asset returns because of noise traders involved in the market. This study examines whether there exists any nonlinear dynamics in Asian stock markets. We employ the smooth transition autoregressive model with the percentage change in trading volume as the transition variable to capture the nonlinear movement between stock returns and trading volume in Taiwan, Hong Kong, Singapore, and Korea stock markets. The results show nonlinear dynamics exist between stock returns and trading volume in the stock market. Moreover, trading volume plays an important role for the cyclical movements in the stock market.

Suggested Citation

  • Wu-Jen Chuang & Liang-Yuh Ou-Yang & Wen-Chen Lo, 2009. "Nonlinear Market Dynamics Between Stock Returns And Trading Volume: Empirical Evidences From Asian Stock Markets," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice (1954-2015), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 56, pages 621-634, November.
    • Handle: RePEc:aic:journl:y:2009:v:56:p:621-634
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