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Testing for linear and nonlinear Granger Causality in the stock price--volume relation: Turkish banking firms’ evidence

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  • Nevin Yörük
  • Cumhur Erdem
  • Meziyet Sema Erdem

Abstract

In this study, the causality test, proposed by Peguin-Feissolle and Terasvirta (1999), based on a Taylor expansion of the nonlinear model, is used to examine the dynamic relationship between daily Turkish banking sector stock price and trading volume. Evidence is found of significant linear and nonlinear causality between these two series.

Suggested Citation

  • Nevin Yörük & Cumhur Erdem & Meziyet Sema Erdem, 2006. "Testing for linear and nonlinear Granger Causality in the stock price--volume relation: Turkish banking firms’ evidence," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(3), pages 165-171, May.
  • Handle: RePEc:taf:apfelt:v:2:y:2006:i:3:p:165-171
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    References listed on IDEAS

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    1. Schwert, G William, 1989. " Why Does Stock Market Volatility Change over Time?," Journal of Finance, American Finance Association, vol. 44(5), pages 1115-1153, December.
    2. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
    3. Foster, F Douglas & Viswanathan, S, 1995. "Can Speculative Trading Explain the Volume-Volatility Relation?," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 379-396, October.
    4. Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(01), pages 109-126, March.
    5. Peguin-Feissolle, A. & Terasvirta, T., 1999. "A General Framework for Testing the Granger Noncausality Hypothesis," G.R.E.Q.A.M. 99a42, Universite Aix-Marseille III.
    6. Simon H. Kwan, 2002. "Bank security prices and market discipline," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue dec20.
    7. Silvapulle, Param & Choi, Jong-Seo, 1999. "Testing for linear and nonlinear granger causality in the stock price-volume relation: Korean evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 39(1), pages 59-76.
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