Dynamic Relationship between Stock Market Returns and Trading Volume: Evidence from Indian Stock Market

  • NUPUR GUPTA BHATTACHARYA K.J. SOMAIYA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH, Mumbai University
  • Gopal Zavar K.J. Somaiya Institute of Management and Research
Keywords: Sensex, stocks traded, total trades, stock turnover, granger causality, Vector autoregression

Abstract

This paper empirically examines the relationship between the stock returns & the trading volume for Sensex. Three main measures of volume traded namely number of shares traded; total turnover of the shares traded & the no. of transactions are used. Their daily data for a five year period were taken for the study. The contemporaneous correlation between the volume & returns was studied after it was found that there was no unit root in the data. A positive contemporaneous relation between the volume & the returns was found. The results from Granger causality test suggest us that the returns granger causes volume for Sensex. VAR test also suggests that the stock returns are dependent on the returns of the previous days. It can be explained as in an emerging market like India, the market development cause the sequential information dissemination. It can also be concluded that in Sensex, no. of transactions can prove to be a better proxy of information than number of shares traded or turnover.

Author Biographies

NUPUR GUPTA BHATTACHARYA, K.J. SOMAIYA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH, Mumbai University
Assistant Professor (Senior Scale)Finance: DepartmentManagement
Gopal Zavar, K.J. Somaiya Institute of Management and Research
Final Year Student of MMS 14-16K.J. Somaiya Institute of Management and Research

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Published
25-06-2016
How to Cite
BHATTACHARYA, N., & Zavar, G. (2016). Dynamic Relationship between Stock Market Returns and Trading Volume: Evidence from Indian Stock Market. Journal of Global Economy, 12(2), 123-136. Retrieved from http://www.rcssindia.org/jge/index.php/jge/article/view/421
Section
Articles

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