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The Dynamic Relationship between Stock Volatility and Trading Volume

Author

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  • Muhammad Irfan Javaid Attari
  • Saubana Rafiq
  • Hayat Muhammad Awan

Abstract

The objective of the study is to measure the relationship between trading volume and returns; and change in trading volume and returns of stocks in Pakistan.Various techniques such as Unit root tests and GARCH have been applied on the data to determine the relationship between aforesaid variables. For this purpose, weekly data of Karachi Stock Exchange (KSE-100 index) has been collected and analyzed from January 2000 to March 2012.The GARCH results indicate a significant positive relationship between trading volume and returns; and change in trading volume and returns.This relationship is of great importance to individuals from investment and policy making perspective as trading volume reflects information about market expectations, and its relationship with price can have important implications for trading, speculation, forecasting and hedging activities.

Suggested Citation

  • Muhammad Irfan Javaid Attari & Saubana Rafiq & Hayat Muhammad Awan, 2012. "The Dynamic Relationship between Stock Volatility and Trading Volume," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(8), pages 1085-1097.
    • Handle: RePEc:asi:aeafrj:v:2:y:2012:i:8:p:1085-1097:id:952
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    Cited by:

    1. Percival S. Gabriel, 2013. "How Newspaper-Article-Events, Other Stock Market Indices, and the Foreign Currency Rate Affect the Philippine Stock Market," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(4), pages 423-444, April.
    2. Muhammad Naeem & Hao Ji & Brunero Liseo, 2014. "Negative Return-Volume Relationship in Asian Stock Markets: Figarch-Copula Approach," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 2(2), pages 1-20.

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