Modelling price movement in trading volume-volatility relations

Pei Pei Tan, Don Upatissa Asoka Galagedera, Sze Ting

Research output: Contribution to journalArticleResearchpeer-review

Abstract

This study investigated the association between volatility of stock returns and price movement-induced trading volume. In the trading volume and volatility relation, we modeled price movement using indicator variables and coupled them with trading volume. In a sample of Australian stocks, we found that upward price movement-induced trading volume was likely to affect conditional volatility more than downward price movement-induced trading volume. Evidence of this asymmetric effect was stronger in the case of price movement over the trading period than in price movement over the non-trading period. This association was observed even after controlling for asymmetry of news in the previous period.
Original languageEnglish
Pages (from-to)135 - 156
Number of pages22
JournalMalaysian Journal of Economic Studies
Volume52
Issue number2
Publication statusPublished - 2015

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