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The dynamics of the volatility – trading volume relationship: New evidence from developed and emerging markets

Author

Listed:
  • Loredana Ureche-Rangau

    (Université de Picardie Jules Verne, CRIISEA)

  • Fabien Collado

    (Msc student, Ieseg School of Management)

  • Ulysse Galiay

    (Msc student, Ieseg School of Management)

Abstract

This paper empirically investigates whether there is an evolution in the relation between stock market trading volume and volatility in 23 developed and 15 emerging markets. To answer this question, we develop a dynamic application of the TARCH (1, 1) model and first prove that the relationship is variable through time. Then, we focus our analysis on three major financial events, namely the Asian Crisis, the Dot Com bubble burst and the Subprime crisis. We find that the explanatory power of volume is greater during these periods. Finally, we show that the sign of the relationship cannot be clearly set for a specific country or sub group of developed or emerging markets.

Suggested Citation

  • Loredana Ureche-Rangau & Fabien Collado & Ulysse Galiay, 2011. "The dynamics of the volatility – trading volume relationship: New evidence from developed and emerging markets," Economics Bulletin, AccessEcon, vol. 31(3), pages 2569-2583.
    • Handle: RePEc:ebl:ecbull:eb-11-00196
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Mixture of distribution hypothesis; TARCH model; Conditional variance; Trading volume;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G1 - Financial Economics - - General Financial Markets

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