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Revisiting the empirical linkages between stock returns and trading volume

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  • Chen, Shiu-Sheng

Abstract

This paper investigates whether the empirical linkages between stock returns and trading volume differ over the fluctuations of stock markets, i.e., whether the return–volume relation is asymmetric in bull and bear stock markets. Using monthly data for the S&P 500 price index and trading volume from 1973M2 to 2008M10, strong evidence of asymmetry in contemporaneous correlation is found. As for a dynamic (causal) relation, it is found that the stock return is capable of predicting trading volume in both bear and bull markets. However, the evidence for trade volume predicting returns is weaker.

Suggested Citation

  • Chen, Shiu-Sheng, 2012. "Revisiting the empirical linkages between stock returns and trading volume," MPRA Paper 36897, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:36897
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    More about this item

    Keywords

    Stock returns; Trading volume; Stock market fluctuations;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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