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On the Empirical Linkages between Stock Prices and Trading Activity on the German Stock Market

In: Operations Research Proceedings 2004

Author

Listed:
  • Roland Mestel

    (University of Graz)

  • Henryk Gurgul

    (University of Science and Technology)

  • Paweł Majdosz

    (School of Economics and Computer Science)

Abstract

In this study the joint dynamics between stock prices and trading volume are investigated using data from the German stock market. Our results indicate no relations (contemporaneous as well as dynamic) between return levels and trading volume but strong linkages between return volatility and volume data. On including trading volume in the conditional volatility framework (GARCH-type) we provide empirical evidence for the importance of volume data as an indicator for the flow of information on the market. Applying Granger’s test for causality we detect also feedback relations between trading volume and return volatility. These findings corroborate our assumption that trading volume indirectly contains information about stock prices due to its relation to return volatility.

Suggested Citation

  • Roland Mestel & Henryk Gurgul & Paweł Majdosz, 2005. "On the Empirical Linkages between Stock Prices and Trading Activity on the German Stock Market," Operations Research Proceedings, in: Hein Fleuren & Dick Hertog & Peter Kort (ed.), Operations Research Proceedings 2004, pages 288-296, Springer.
    • Handle: RePEc:spr:oprchp:978-3-540-27679-1_36
    DOI: 10.1007/3-540-27679-3_36
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    Cited by:

    1. Henryk Gurgul & Roland Mestel & Robert Syrek, 2008. "Polish Stock Market and some foreign markets - dependence analysis by copulas," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 18(2), pages 17-35.

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