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Relationships between Trading Volume, Stock Returns and Volatility: Evidence from the French Stock Market

Anthony Miloudi, Mondher Bouattour and Ramzi Benkraiem
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Mondher Bouattour: La Rochelle Business School LGCO University of Toulouse Paul Sabatier,

Bankers, Markets & Investors, 2016, issue 144, 44-58

Abstract: This paper investigates the relations between market turnover, stock returns and conditional volatility on the French stock market. Our database consists of monthly observations of 128 common stocks from April 1996 to October 2014. We aggregate data to study the market-wide relationships between turnover, returns and volatility. Using contemporaneous relations, bivariate vector autoregression (VAR), Granger causality test and impulse response functions, we find that market turnover is positively related to contemporaneous and past returns, which we interpret as evidence of the mixture of distributions hypothesis (MDH) and the investor overconfidence hypothesis. This suggests that stock returns help forecast volume. However, there is weaker evidence regarding the informative content of trading volume when forecasting returns.

Keywords: Turnover; Stock Market Returns; Var Analysis; Granger Causality Test; Impulse Response Functions (search for similar items in EconPapers)
JEL-codes: G10 G12 C32 (search for similar items in EconPapers)
Date: 2016
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Working Paper: Relationships between Trading Volume, Stock Returns and Volatility: Evidence from the French Stock Market (2016)
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