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Relationships between Trading Volume, Stock Returns and Volatility: Evidence from the French Stock Market

Author

Listed:
  • Anthony Miloudi

    (CRIEF [Poitiers] - Centre de recherche sur l'intégration économique et financière - UP - Université de Poitiers = University of Poitiers, La Rochelle Business School)

  • Mondher Bouattour

    (La Rochelle Business School, LGCO - Laboratoire Gouvernance et Contrôle Organisationnel - UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse)

  • Ramzi Benkraiem

    (Audencia Business School)

Abstract

This paper investigates the relations between market turnover, stock returns and conditional volatility on the French stock market. Our database consists of monthly observations of 128 common stocks from April 1996 to October 2014. We aggregate data to study the market-wide relationships between turnover, returns and volatility. Using contemporaneous relations, bivariate vector autoregression (VAR), Granger causality test and impulse response functions, we find that market turnover is positively related to contemporaneous and past returns, which we interpret as evidence of the mixture of distributions hypothesis (MDH) and the investor overconfidence hypothesis. This suggests that stock returns help forecast volume. However, there is weaker evidence regarding the informative content of trading volume when forecasting returns.

Suggested Citation

  • Anthony Miloudi & Mondher Bouattour & Ramzi Benkraiem, 2016. "Relationships between Trading Volume, Stock Returns and Volatility: Evidence from the French Stock Market," Post-Print hal-01363700, HAL.
    • Handle: RePEc:hal:journl:hal-01363700
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    Cited by:

    1. Nidhal Mgadmi & Khemaies Bougatef, 2017. "Modeling volatility of the French stock market," Economics Bulletin, AccessEcon, vol. 37(2), pages 988-998.
    2. Olkhov, Victor, 2020. "Price, Volatility and the Second-Order Economic Theory," MPRA Paper 102767, University Library of Munich, Germany.
    3. Victor Olkhov, 2020. "Volatility Depends on Market Trades and Macro Theory," Papers 2008.07907, arXiv.org, revised Jun 2024.
    4. Andrey Kudryavtsev, 2019. "The Effect Of Trading Volumes On Stock Returns Following Large Price Moves," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 64(220), pages 85-116, January –.

    More about this item

    Keywords

    Turnover; Stock market returns; VAR analysis; Granger causality test; Impulse response functions.;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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