Joint Dynamics of Prices and Trading Volume on the Polish Stock Market
This paper concerns the relationship between stock returns and trading volume. We use daily stock data of the Polish companies included in the WIG20 segment (the twenty most liquid companies quoted on the primary market of the Warsaw Stock Exchange). The sample covers the period from January 1995 to April 2005. We find that there is no empirical support for a relationship between stock return levels and trading volume. On the other hand, our calculations provide evidence for a significant contemporaneous interaction between return volatility and trading volume. Our investigations reveal empirical evidence for the importance of volume data as an indicator of the flow of information into the market. These results are in line with suggestions from the Mixture of Distribution Hypothesis. By means of the Granger causality test, we establish causality from both stock returns and return volatility to trading volume. Our results indicate that series on trading activities have little additional explanatory power for subsequent price changes over that already contained in the price series.
Volume (Year): 3 (2005)
Issue (Month): 2 ()
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