 Do Trading Volume and Bid-Ask Spread Contain Information to Predict Stock Returns? Intraday Evidence from IndiaRashmi Ranjan Paital and Naresh Kumar Sharma Asian Economic and Financial Review, 2016, vol. 6, issue 3, 135-150 Abstract: Relying on the mixture of distribution hypothesis (MDH) and the sequential information arrival hypothesis (SIAH), this paper empirically examines the relationship between stock returns, trading volume and bid-ask spread for 50 Indian stocks using high frequency 5-minute data set for the period July 2, 2012 to December 31, 2012. This is the first study in India using bid-ask spread as yet another measure of information flow variable along with trading volume. Our empirical findings provide evidence of a positive contemporaneous relationship between absolute returns and trading volume as well as between absolute returns and bid-ask spread. The Granger causality test results show that the information content of trading volume and bid-ask spread are useful for predicting stock returns in Indian stock market. Overall results seem to indicate that information arrival to investors tends to follow a sequential rather than simultaneous process as suggested by SIAH. In summary, both trading volume and bid-ask spread serve as a good measure of information variable in India. Keywords: Stock returns; Trading volume; Bid-ask spread; Market microstructure; MDH; SIAH. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:asi:aeafrj:v:6:y:2016:i:3:p:135-150:id:1470 Access Statistics for this article More articles in Asian Economic and Financial Review from Asian Economic and Social Society |
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