Modelling Price Movement in Trading Volume-Volatility Relations

  • Pei Pei Tan University of Malaya
  • Don U.A. Galagedera Monash University
  • Sze Shi Ting Monash University

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.

Author Biographies

Pei Pei Tan, University of Malaya

Department of Applied Statistics, Faculty of Economics and Administration, University of Malaya

Don U.A. Galagedera, Monash University

Department of Econometrics and Business Statistics, Monash University

Sze Shi Ting, Monash University

Department of Econometrics and Business Statistics, Monash University

Published
2015-12-01
How to Cite
TAN, Pei Pei; GALAGEDERA, Don U.A.; TING, Sze Shi. Modelling Price Movement in Trading Volume-Volatility Relations. Malaysian Journal of Economic Studies, [S.l.], v. 52, n. 2, p. 135-156, dec. 2015. ISSN 1511-4554. Available at: <https://mjes.um.edu.my/article/view/2788>. Date accessed: 22 sep. 2017.
Section
Articles