Testing for monotonicity, linearity and symmetry between trading volume and price returns in the futures markets of agricultural commodities: a discussion on the financial implications

Abstract

Purpose

The aim of this study is to investigate for monotonicity, linearity and symmetry for the price volatility–trading volume relationship in the futures markets of agricultural commodities.

Design/methodology/approach

Empirical findings are produced with the use of a highly flexible, nonparametric approach. Data are daily prices and volumes from the commodities of corn, hard red wheat, oats, rice and soybeans.

Findings

Results reveal violations of monotonicity locally but not globally. Volume and price volatility have, in all markets, a nonlinear relationship to each other, indicating that the strength of the relationship does not remain constant over the entire joint distribution. Global symmetry is rejected for the markets of oats and hard red wheat but cannot be rejected for the remaining three markets. The latter suggests that large values of good volatility are likely to occur together with high trading volumes, as do large values of bad volatility in these markets.

Originality/value

To the best of the authors’ knowledge, this is the first empirical work to test simultaneously for monotonicity, linearity and symmetry between price volatility and trading volume in the futures markets of agricultural commodities.

Citation

Panagiotou, D. and Karamanis, K. (2023), "Testing for monotonicity, linearity and symmetry between trading volume and price returns in the futures markets of agricultural commodities: a discussion on the financial implications", Studies in Economics and Finance, Vol. 40 No. 5, pp. 996-1020. https://doi.org/10.1108/SEF-03-2023-0138