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Article
Publication date: 1 December 2005

Frederick (Fengming) Song, Hui Tan and Yunfeng Wu

The Chinese stock market is a typical emerging market with special features that are very different from those of mature markets. The objective of this study is to…

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Abstract

Purpose

The Chinese stock market is a typical emerging market with special features that are very different from those of mature markets. The objective of this study is to investigate whether and how these features affect the volatility‐volume relation for Chinese stocks.

Design/methodology/approach

This paper examines the roles of the number of trades, size of trades, and share volume in explaining the volatility‐volume relation in the Shanghai Stock Exchange with high frequency trade data used.

Findings

The results confirm that the volatility‐volume relation is driven mainly by the number of trades on the Chinese stock market. The number of trades explains the volatility‐volume relation better than the size of trades. Furthermore, some results are obtained that differ from those of mature markets, such as the US market. The results show that the second largest sized trades affect the volatility more than other trades on the Chinese market.

Originality/value

The results show that, in the Shanghai Stock Exchange, informed traders camouflage their private information or manipulation behavior through the second largest sized trades. The results may have important implications for work explaining the volatility‐volume relation on the Chinese stock market, further providing a reference by which to regulate emerging markets.

Details

The Journal of Risk Finance, vol. 6 no. 5
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 4 September 2007

Michael E. Drew, Madhu Veeraraghavan and Min Ye

The purpose of this paper is to investigate the profitability of momentum investment strategy and the predictive power of trading volume for equities listed in the…

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1307

Abstract

Purpose

The purpose of this paper is to investigate the profitability of momentum investment strategy and the predictive power of trading volume for equities listed in the Australian Stock Exchange.

Design/methodology/approach

Following the Lee and Swaminathan's approach, portfolios on past returns and past trading volume is constructed. In this approach, all stocks are ranked independently on the basis of past returns and past trading volume. The stocks are then assigned to one of five portfolios based on past returns and one of three portfolios based on trading volume over the same period.

Findings

A strong momentum effect for the Australian market during the period 1988 through 2002 is observed. Further, momentum plays an important role in providing information about stocks. Past trading volume appears to predict both the magnitude and persistence of price momentum.

Research limitations/implications

Substantial momentum observed in monthly stock returns has investment implications. Abnormal returns vary from 0.3 to 7 per cent per month in the intermediate horizon.

Originality/value

This study provides an out of sample evidence by examining the relationship between “trading volume” (measured by the turnover ratio) and “momentum” strategies in an Australian setting.

Details

Managerial Finance, vol. 33 no. 10
Type: Research Article
ISSN: 0307-4358

Keywords

Open Access
Article
Publication date: 28 February 2014

Shiyong Yoo

In this study, we explore the empirical relationship between trading volume and volatility among KOSPI200 index stock market, futures and options markets. In particular…

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Abstract

In this study, we explore the empirical relationship between trading volume and volatility among KOSPI200 index stock market, futures and options markets. In particular, in explaining the volatility of each market, the trading in other markets, as well as the trading volume of other markets, also served as explanatory variables. In other words, cross-market effects of trading volume by investor types are analyzed. The empirical results show that there exist the cross-market effects of the relationship between trading volume and volatility in deeply integrated financial markets such as KOSPI200 index stock, futures and options markets. That is, the volatility of one market is explained by the trading volume of trader types in other financial markets. And, overall options trading increases the volatility of each market, while the overall futures trading volume of foreign investors reduce the volatility of each market. Trading volume of Individual investors does not reduce the volatilities of KOSPI200 index and futures markets. That is, trading volume of Individual investors in stock, futures, and options markets increase the volatilities of stock and futures. This implies that foreign investors are informed traders, whereas individual investors are liquidity traders.

Details

Journal of Derivatives and Quantitative Studies, vol. 22 no. 1
Type: Research Article
ISSN: 2713-6647

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Book part
Publication date: 9 September 2020

Hon-Wei Leow and Wee-Yeap Lau

This study examines the impact of the trading volume on Initial Public Offering (IPO) initial return in the context of an emerging market from January 2006 to December…

Abstract

This study examines the impact of the trading volume on Initial Public Offering (IPO) initial return in the context of an emerging market from January 2006 to December 2016. Models consist of hierarchical and multiple regressions have been evaluated. Our results show, firstly, IPO provides an average of 21.90% of initial return to investors on the first trading day, 9.08% of return on the second day of trading, and 7.12% of return on the third day of return. Secondly, there is a positive relationship between the oversubscription ratio and initial return and no relationship between trading volume and initial return on the first three trading day. Thirdly, the trading volume does not act as a moderator that worsens the relationship between the oversubscription ratio and initial return. Lastly, this study shows that investors should actively participate in the subsequent trading of an IPO. Higher participation will bring greater liquidity and shareholder wealth in the stock market. To the authors' knowledge, this is the first study on the moderating effect of trading volume on IPO initial return in an emerging market.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-83867-363-5

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Book part
Publication date: 25 March 2010

Eric C. Lin

When a stock is added into the S&P 500 Index, it in effect becomes cross-listed in the Index derivative markets. When index-based trading strategies such as index…

Abstract

When a stock is added into the S&P 500 Index, it in effect becomes cross-listed in the Index derivative markets. When index-based trading strategies such as index arbitrage are executed, the component stocks are directly affected by such trading. We find increased volatility of daily returns, plus increased trading volume for the underlying stocks. Utilizing a list of S&P 500 Index composition changes over the period September 1976 to December 2005, we study the market-adjusted volume turnover and return variance of the stocks added to and deleted from the Index. The results indicate that after the introduction of the S&P 500 Index futures and options contracts, stocks added to the S&P 500 experience statistically significant increase in both trading volume and return volatility. Both daily and monthly return variances increase following index inclusion. When stocks are removed from the index, though, neither volatility of returns nor trading volume experiences any significant change. So, we have new evidence showing that Index inclusion changes a firm's return volatility, and supporting the destabilization hypothesis.

Details

Research in Finance
Type: Book
ISBN: 978-1-84950-726-4

Open Access
Article
Publication date: 18 June 2021

Woosung Jung and Mhin Kang

This study aims to analyze the effect of change in trading volume on the short-term mean reversion of the stock price in the Korean stock market. Through the variance…

Abstract

This study aims to analyze the effect of change in trading volume on the short-term mean reversion of the stock price in the Korean stock market. Through the variance ratio test, this paper finds that the market shows the mean reversion pattern after 2000, but not before. This study also confirms that the mean reversion property is significantly reduced if the effect of change in trading volume is excluded from the return of a stock with a significant contemporaneous correlation between return and change in trading volume in the post-2000 market. The results appear in both the Korea Composite Stock Price Index and Korea Securities Dealers Automated Quotation. This phenomenon stems from the significance of the return response to change in trading volume per se and not the sign of the response. Additionally, the findings imply that the trading volume has a term structure because of the mean reversion of the trading volume and the return also has a partial term structure because of the contemporaneous correlation between return and change in trading volume. This conclusion suggests that considering the short-term impact of change in trading volume enables a more efficient observation of the market and avoidance of asset misallocation.

Details

Journal of Derivatives and Quantitative Studies: 선물연구, vol. 29 no. 3
Type: Research Article
ISSN: 1229-988X

Keywords

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Book part
Publication date: 2 December 2003

Louis Gagnon and G.Andrew Karolyi

Using intraday prices for the S&P 500 and Nikkei Stock Average stock indexes and aggregate trading volume for the New York and Tokyo Stock Exchanges, we show how short-run…

Abstract

Using intraday prices for the S&P 500 and Nikkei Stock Average stock indexes and aggregate trading volume for the New York and Tokyo Stock Exchanges, we show how short-run comovements between national stock market returns vary over time in a way related to the trading volume and liquidity in those markets. We frame our analysis in the context of the heterogeneous-agent models of trading developed by Campbell, Grossman and Wang (1993) and Blume, Easley and O’Hara (1994) and Wang (1994) which predict that trading volume acts as a signal of the information content of a given price move. While we find that there exists significant short-run dependence in returns and volatility between Japan and the U.S., we offer new evidence that these return “spillovers” are sensitive to interactions with trading volume in those markets. The cross-market effects with volume are revealed in both close-to-open and open-to-close returns and often exhibit non-linear patterns that are not predicted by theory.

Details

The Japanese Finance: Corporate Finance and Capital Markets in ...
Type: Book
ISBN: 978-1-84950-246-7

Open Access
Article
Publication date: 17 August 2021

Kashif Rashid, Yasir Bin Tariq and Mamoon Ur Rehman

This study examines the role of behavioural factors, such as confidence, optimism, pessimism and rational expectation, in affecting investment decisions in the Pakistani…

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1173

Abstract

Purpose

This study examines the role of behavioural factors, such as confidence, optimism, pessimism and rational expectation, in affecting investment decisions in the Pakistani stock market.

Design/methodology/approach

Using daily trading data of KSE-100 index from January 2012 to December 2015, different regression models, including descriptive statistics and stationarity tests, are performed.

Findings

Results indicate that stock market trading has suffered from pessimistic behaviour of investors. In the first model, the authors find a positive sign of confidence and negative sign of optimism with the trading volume. The second model shows a positive role of confidence and rational expectations in affecting the trading volume in daily, Monday and Friday samples. The results of the third model show a negative sign of both optimism and rational expectation with the trading volume. Furthermore, the next model shows a negative sign of confidence combined with pessimism while testing their relationship with the trading volume. Finally, results of the final model suggest that optimism negatively affects the trading volume, and on the other hand, pessimism has a positive impact on the trading volume.

Research limitations/implications

The method and empirical testing of behavioural biases and their relationship with economic variable used in this study seem to be a promising way to better understand the role of psychology in deriving financial decisions for academics and policymakers.

Originality/value

This study uses secondary data for measuring behavioural biases and decomposes the effect between rational expectation and behavioural biases.

Details

Asian Journal of Accounting Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2443-4175

Keywords

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Book part
Publication date: 21 August 2019

Peter Huaiyu Chen, Kasing Man, Junbo Wang and Chunchi Wu

We examine the informational roles of trades and time between trades in the domestic and overseas US Treasury markets. A vector autoregressive model is employed to assess…

Abstract

We examine the informational roles of trades and time between trades in the domestic and overseas US Treasury markets. A vector autoregressive model is employed to assess the information content of trades and time duration between trades. We find significant impacts of trades and time duration between trades on price changes. Larger trade size induces greater price revision and return volatility, and higher trading intensity is associated with a greater price impact of trades, a faster price adjustment to new information and higher volatility. Higher informed trading and lower liquidity contribute to larger bid–ask spreads off the regular daytime trading period.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-78973-285-6

Keywords

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Article
Publication date: 16 February 2021

Changro Lee and Keith Key-Ho Park

It is important to forecast local trading volumes as well as global trading volumes because the real estate market is always characterized as a localized market. The house…

Abstract

Purpose

It is important to forecast local trading volumes as well as global trading volumes because the real estate market is always characterized as a localized market. The house trading volume at the local level is forecast through appropriate models to enhance the predictive accuracy.

Design/methodology/approach

Four representative housing submarkets in South Korea are selected, and their trading volumes are forecast. A well-established time-series model and a deep learning algorithm are employed: the autoregressive integrated moving average (ARIMA) model and the recurrent neural network (RNN), respectively. The trading volumes in adjacent areas are utilized as covariates, and an ensemble prediction is applied additionally to improve the model performance.

Findings

The results indicate no significant difference in prediction performance between the ARIMA model and the RNN, which can be attributed to the insufficient amount of data used. It is discovered that the spillover effects of trading volumes across the study areas can be exploited to improve the predictive accuracy, and that the diversity of the predicted values from the candidate models can be used to increase the forecasting accuracy further.

Originality/value

Whereas property prices have been investigated extensively, the discussion on forecasting trading activity of properties is limited in the literature. The results of this study are expected to promote more interest in adopting a local perspective and using a diversity of predicted values when forecasting house trading volumes.

Details

Engineering, Construction and Architectural Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0969-9988

Keywords

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