International Journal of Business and Economics Volume 2, No. 1 April​, 2003

Is Volatility of Equity Markets a Volume Story? A Nonparametric Analysis

Christos I. Giannikos

Department of Economics and Finance, Baruch College, U.S.A.

Hany Guirguis

Department of Economics and Finance, Manhattan College, U.S.A.

Deniz Ozenbas

Department of Economics and Finance, Montclair State University, U.S.A.

Abstract

In this paper we document and account for the non-normality of returns exhibited by the indices in our samples. Consequently we re-examine the relationship between volatility and volume while distinguishing between returns within a trading day and returns across trading days. Our results indicate that the volatility exhibited by both types of returns is positively and significantly related to volume. Hence the results provide an additional explanation for short-term volatility patterns, which is not necessarily within a strict price formation framework.

Keywords： volatility, volume, multiple equation models, nonparametric methods.

JEL Classifications：G10, G11, C14.

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