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The Behaviour of Equity Trading Volume on the London Stock Exchange

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  • K K Opong
  • N Biekpe
  • P McIlkenny

Abstract

This study uses statistical analysis based on chaos theory to examine the trading volume behaviour of the London Financial Times Stock Exchange (FTSE) All Share Index and FTSE 100 Index. The behaviour of the trading volume series are not independent and identically distributed (IID). The results of the study show that some cycles or patterns occur more frequently than would be expected in a true random series. The results may also explain the observed weak association between stock price changes and trading volume reported in previous studies since those studies were based on linear modelling whereas the behaviour of both stock prices and trading volume may be either a chaotic process, non-linear stochastic process or linear stochastic dependence. A GARCH(1,1) model which appear to explain equity index return series (Opong et al. (1999)) do s not explain the behaviour of the equity volume index series on the London Stock Exchange.

Suggested Citation

  • K K Opong & N Biekpe & P McIlkenny, 2000. "The Behaviour of Equity Trading Volume on the London Stock Exchange," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 24(1), pages 69-85, March.
    • Handle: RePEc:taf:rseexx:v:24:y:2000:i:1:p:69-85
    DOI: 10.1080/03796205.2000.12129266
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