On the Empirical Linkages between Stock Prices and Trading Activity on the German Stock Market

Roland Mestel (), Henryk Gurgul and Paweł Majdosz

A chapter in Operations Research Proceedings 2004, 2005, pp 288-296 from Springer

Abstract: Abstract In this study the joint dynamics between stock prices and trading volume are investigated using data from the German stock market. Our results indicate no relations (contemporaneous as well as dynamic) between return levels and trading volume but strong linkages between return volatility and volume data. On including trading volume in the conditional volatility framework (GARCH-type) we provide empirical evidence for the importance of volume data as an indicator for the flow of information on the market. Applying Granger’s test for causality we detect also feedback relations between trading volume and return volatility. These findings corroborate our assumption that trading volume indirectly contains information about stock prices due to its relation to return volatility.

Keywords: Stock Price; Stock Return; Price Change; Trading Volume; Granger Causality (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:spr:oprchp:978-3-540-27679-1_36

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DOI: 10.1007/3-540-27679-3_36

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