المستخلص: |
The current research investigates the joint dynamics of stock returns and trading volume (as measured by turnover) in a small emerging market, i.e., the Egyptian Securities . Exchange (ESE). The researchers are interested in the power of stock trading volume in predicting future return volatility and autocorrelations. More precisely, the main theme of this study is twofold: First; testing the contemporaneous relationship between volume and volatility, using GARCH models. Second; investigating the dynamic (causal) relationship between trading volume and stock returns (and volatility), to determine whether information about trading volume is useful in improving forecasts of price changes (i.e., returns) and return volatility. There are two related types of theories that explain the volatility - volume relationship: information theories and dispersion of beliefs (noise) theories. Clearly, the main idea of this research contradicts the efficient market hypothesis (EMH), which implies that volume should not have any predictive power. This is the main hypothesis tested in this study.
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