AN EMPIRICAL STUDY OF RETURN-VOLUME RELATIONSHIP FOR INDIAN MARKET

Abstract

Generally there is a common belief that returns and trading activities have a strong positive relationship. This paper analyzes return-volume relationship in Indian context, both in contemporaneous as well as lead- lag. Initial screening of returns and trading activity data shows some idiosyncratic aspect of Indian market although a positive return- activity relationship is acknowledged. This study also documents the dissimilarity in relationship for positive and negative changes in prices. As regards lead-lag relationship, this paper finds strong evidence of volume causing returns than vice-versa.Trading volume, Price change, contemporaneous relationship, lead-lag relationship, systematic irregularities, ARIMA filtering, Haugh test, Granger Sims Causality