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Price-Volume Granger Causality Tests in the Egyptian Stock Exchange (EGX)

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  • Kobana Abukari
  • Tov Assogbavi

Abstract

Using weekly Egyptian stock exchange data on the 34 most active companies stretching from 2011 to 2017, this study finds that price changes Granger cause trading volume up to 8 weeks (lags), supporting the sequential information arrival model in the EGX. We also find a robust contemporaneously positive asymmetric relationship between price change and trading volume, confirming two well-documented characteristics of the price-volume relationship as well as two major adages of Wall Street- “it takes volume to move prices†and “volume in bull markets is heavier than volume in bear markets†. Overall, our results imply that although there is some sequential diffusion of information, the EGX’s efforts at improving its microstructure through initiatives such as the 2009 Presidential Degree on structure and governance, appear to have helped in improving instantaneous access to information – as exemplified by our evidence of strong contemporaneous positive price-volume relationship.

Suggested Citation

  • Kobana Abukari & Tov Assogbavi, 2019. "Price-Volume Granger Causality Tests in the Egyptian Stock Exchange (EGX)," Accounting and Finance Research, Sciedu Press, vol. 8(3), pages 1-48, August.
    • Handle: RePEc:jfr:afr111:v:8:y:2019:i:3:p:48
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    References listed on IDEAS

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    1. Li, Haiqi & Zhong, Wanling & Park, Sung Y., 2016. "Generalized cross-spectral test for nonlinear Granger causality with applications to money–output and price–volume relations," Economic Modelling, Elsevier, vol. 52(PB), pages 661-671.
    2. Aravind Sampath & Parth Garg, 2019. "Contemporaneous and Causal Relationship between Returns and Volumes: Evidence from Nifty Futures," International Review of Finance, International Review of Finance Ltd., vol. 19(3), pages 653-664, September.
    3. Epps, Thomas W & Epps, Mary Lee, 1976. "The Stochastic Dependence of Security Price Changes and Transaction Volumes: Implications for the Mixture-of-Distributions Hypothesis," Econometrica, Econometric Society, vol. 44(2), pages 305-321, March.
    4. Wang, Zijun & Qian, Yan & Wang, Shiwen, 2018. "Dynamic trading volume and stock return relation: Does it hold out of sample?," International Review of Financial Analysis, Elsevier, vol. 58(C), pages 195-210.
    5. Mai Ahmed Abdelzaher, 2019. "The Impact of January Events on Stock Performance in the Egyptian Stock Market," Accounting and Finance Research, Sciedu Press, vol. 8(1), pages 174-174, February.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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