Dynamic Relationship between Stock Returns, Trading Volume, and Returns Volatility: An Empirical Investigation from Asian Stock Markets

Abstract

This study aims to investigate the causal relationship between stock returns and stock volume, using the data of eight developing and developed countries of Asia over nine year, including Pakistan, India, Malaysia, China, Japan, South Korea, Hong Kong, and Taiwan (that carry 40 percent share of the world's GDP). By incorporating the bivariate GARCH approach, to examine how stock returns affect trading volume and vice versa. According to the results, there is a contemporary relationship between stock return and trading volume before testing Granger causality; hence, a rise in the market index returns is accompanied by mounting volume, whereas the declining market is accompanied by falling volume. So, the Granger causality predicts the trends among stock markets of sample Asian countries.