Dynamic relationship between trading volume, returns and returns volatility: an empirical investigation on the main African’s stock markets

Abstract

In this empirical investigation, we examine the relationship between trading volume, return and volatility for eleven African Stock Exchanges. This study covers the period from September 24, 2010 to September 24, 2020, i.e., a total of 3037 daily observations per country. The relationship between trading volume and return is examined using the Granger causality test. For the relationship between trading volume and returns volatility, we use an asymmetric EGARCH (1, 1) model. The results indicate that returns do not cause volume while volume causes return in some countries’ Stock Exchanges. Regarding the volatility of the daily return, the study shows on the one hand that the persistence in the volatility is low and the trading volume increases this persistence on the majority of Stock Exchanges. On the other hand, lag trading volume affects the daily volatility of the markets.

Relationship between Stock Returns and Trading Volume at the Bourse Régionale des Valeurs Mobilières, West Africa

“…They found that stock returns generally Granger-cause trading volume, while lagged trading volume has a negative causal effect on returns at low quantiles and a positive causal effect on them at high quantiles. Toe and Ouedraogo (2022) considered eleven African stock exchanges over the period 24 September 2010 to 24 September 2020 (i.e., a total of 3037 daily observations per country). They found that returns do not cause volume, while volume causes returns in the stock exchanges of some countries.…”