The Empirical Investigation of Causal Relationship between Intraday Return and Volume in Indian Stock Market

Gurleen Sahota and Balwinder Singh

Vision, 2016, vol. 20, issue 3, 199-210

Abstract: This article examines the causal relationship between intraday return and volume by using 1-minute intraday data of 35 stocks of S&P CNX Nifty index during the period from April 2007 to March 2011. The empirical analysis provides evidence to the mixture of distribution hypothesis (MDH), as a majority of stocks of S&P CNX Nifty index show no causal relationship between the intraday return–volume relationships. However, this study finds evidence of significant causal and lead–lag relations between the intraday return–volume associations for some stocks. These findings reveal strong indication of uni- and bi-directional causality, thus supporting the sequential information arrival hypothesis (SIAH) which suggests that lagged values of volume provide the predictability component of current return (vice versa).

Keywords: High-frequency Data; Granger Causality and Vector Autoregression Test; Mixture of Distribution Hypothesis; Sequential Information Arrival Hypothesis (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:sae:vision:v:20:y:2016:i:3:p:199-210

DOI: 10.1177/0972262916651533

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