The asymmetric price-volume relation revisited: evidence from Qatar

摘要

Purpose - This study aims to revisit the stock price-volume relations, providing new evidence from the emerging market of Qatar. In particular, three main issues are examined using both aggregate market-and sector-level data. First, the return-volume relation and whether or not this relation is asymmetric. Second, the common characteristics of return volatility; and third, the nature of the relation between trading volume and return volatility. Design/methodology/approach - The study uses the OLS and VAR modeling approaches to examine the contemporaneous and dynamic (causal) relations between index returns and trading volume, respectively, while an EGARCH-X(1,1) model is used to analyze the volatility-volume relation. The data set comprises daily index observations and the corresponding trading volumes for the entire market and the individual seven sectors of the Qatar Exchange (i.e. banks and financial services, consumer goods and services, industrials, insurance, real estate, telecommunications and transportation). Findings - The empirical analysis reports evidence of a positive contemporaneous return-volume relation in all sectors barring transportation and insurance. This relation appears to be asymmetric for all sectors. For the market and almost all sectors, there is no significant causality between returns and volume. By and large, these findings lend support for the implications of the mixture of distributions hypothesis (MDH). Lastly, the information content of lagged volume seems to have an important role in predicting the future dynamics of return volatility in all sectors, with the industrials being the exception. Practical implications - The findings provide important implications for portfolio managers and investors, given that the volume of transactions is generally found to be informative about the price movement of sector indices. Specifically, tracking the behavior of trading volume over time can give a broad portrayal of the future direction of market prices and volatility of equity, thereby enriching the information set available to investors for decision-making. Originality/value - Based on both market- and sector-level data from the emerging stock market of Qatar, this study attempts to fill an important void in the literature by examining the return-volume and volatility-volume linkages.