Price Changes, Trading Volume and Time-Varying Conditional Volatility: Evidence from Asia Pacific Stock Market
Price Changes, Trading Volume and Time-Varying Conditional Volatility: Evidence from Asia Pacific Stock Market

Summary/Abstract: In this article we examine the price changes, trading volume and time-varying conditional volatility for select Asia Pacific stock market by using daily dataset for the period from 1st January 2005 to 31st December 2008. The findings demonstrate that for some countries, return cause volume and volume cause returns. Moreover, the results show a positive correlation between stock return and trading volume series for most of the stock markets. On the other hand, the results also signify that trading volume has no significant effect on reducing the volatility persistence for majority of stock markets in the sample, this challenging the presence of “Mixed Distribution Hypothesis” in Asia-Pacific stock markets. Variance Decomposition (VDC) is used to measure the asymmetric relationship between stock return and trading volume. Finally, the presence of past and current returns adds some predictive power for future returns in these countries and evidenced stronger returns causing volume than volume causing returns.

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