An empirical analysis of the stock price-volume relationship

Investigation of Causal Relationship between Stock Prices and Trading Volume using Toda and Yamamoto Procedure

“…Early studies examined the correlation between volume and the price change as well as volume and the absolute value of the price change (Granger and Morgenstern (1963), Godfrey et al, (1964), Crouch (1970)). More recent studies were interested in investigating the causal relationship between these two market variables (Smirlock and Starks, 1988;Chordia and Swaminathan, 2000;Chen et al, 2001). The linear and non-linear causality between the stock prices and trading volume has also received a substantial amount of attention in the literature (Campbell et al, 1993;Martikainen et al, 1994;Hiemstra and Jones, 1994) but most of these researches have focused almost exclusively on the well-developed financial markets, usually the U.S. markets.…”

“…Karpoff (1987) proposed a simple model of the price-volume relationship called "asymmetric volume-price change hypothesis", showing that the relationship is fundamentally different for positive and negative price changes. Smirlock and Starks (1988) empirically examined the lagged relationship between the absolute price changes and volume in the equity markets and investigate the implications of this relationship for the microstructure of these markets. Using Granger causality tests their results indicate that there is a significant causal relationship between absolute price changes and volume at the firm level.…”

Volume effects in the London housing market

“…Comparing these results with those in the nance literature for other assets, the present results are very convincing. For example, while Smirlock and Starks (1988) report gures in the range 13%-16% for the instances of signi cant causality, the analogous gures herein exceed this dramatically with 94% (30 of 32) of boroughs exhibiting a signi cant causal relationship from volume to returns, while the aggregated measure also exhibits signi cant causality from volume to returns with a p-value of 0.00% reported. The two boroughs which fail to reject the no causality null hypothesis from volume to returns are the East London boroughs of Barking and Dagenham and Redbridge.…”

“…Beyond these more speci c results, the analysis showed di erences in the properties of housing relative other nancial assets. This was apparent in both terms of the increased degree of causality detected relative to standard nancial assets (see Smirlock and Starks, 1988) and lack of importance of absolute returns (see Karpo , 1987). …”

The role of internet in stock market

“…In that sense, they provide evidences for the Mixture of Distribution Hypothesis (MDH), which claims that the changes of asset prices at a certain interval is associated with the rate of information flow (Clark, 1973;Epps and Epps, 1976;Harris, 1987 andAndersen, 1996). An alternative appealing explanation for the information-volatility relations is the Sequential Information Arrival Hypothesis (SIAH) (Copeland, 1976;Jennings et al, 1981;Smirlock and Starks, 1988). The SIAH claims that there exist the lead-lag relations between the rate of information flow and return volatility.…”