The Relationship between Trading Volume , Returns and Volatility :
نویسنده
چکیده
The relationship between returns, volatility and trading volume has interested financial economists and analysts for a number of years. A widely documented result is the positive contemporaneous relationship between price returns and trading volume. This paper investigates the contemporaneous and dynamic relationships between trading volume, returns and volatility for Greek index futures (FTSE/ASE-20 and FTSE/ASE Mid 40). For FTSE/ASE-20, we find that price volatility does not significantly impact volume’s volatility, and also, we conclude that a contemporaneous relationship does not hold. Using GARCH methods, the results show a positive and significant effect, indicating that volume contributes significantly in explaining the GARCH effects. Furthermore, the GMM system suggests that market participants use volume as an indication of prices. For FTSE/ASE Mid 40, the results are mixed. The price volatility significantly impacts volume’s volatility, and also, a positive contemporaneous relationship holds. On the other hand, both GARCH and GMM methods confirm that there is no evidence for positive relationship between trading volume and returns. Finally, this study also investigates the dynamic relationship between trading volume and actual returns. For FTSE/ASE-20, the dynamic models show a bi-directional Granger causality (feedback) between volume and actual returns. However, for FTSE/ASE Mid 40, the results indicate that returns do not Granger cause volume and vice versa.
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