gender differential paper IJCRB

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JUNE 2011
INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS VOL 3, NO 2
However; Cornell (1981) and Bessembinder and Seguin (1992) extended the concept by
providing evidence on positive relation between changes in volume and changes in prices in
various futures market contracts. The volume data indicates growth or decline of a particular
contract. It can also measure shifts in the composition of future markets as can be illustrated by
the enormous growth of financial futures compared. Together with the volume data, the price
change is also a closely monitored statistics by market participants. The trading volume may be
thought to carry information about the aggregate change in expectations about the assets. In
addition, any relationship between returns and trading volumes may help devise profitable
trading rules (Bhar &Harmori, 2001).
This relationship is also studied within two important areas i.e. how far the returns volatility
persists in market and does trading volume explain the information arrival to the market?. Huson
Joher Ali Ahmed, Ali Hassan and Annuar M.D Nasir (2005) concluded that current volatility can
be explained by past volatility that tends to persist over time. Saatcioglu and starks (1998) used
monthly data from six Latin American markets (Argentina, Brazil, Chile, Colombia, Mexico and
Venezuela) to test the relation between price changes and volumes and found a positive pricevolume
relations and a causal relationship from volumes to stock price changes but not vice
versa. Campbell, Grossman and Wang (1993) and Smirlock and Starks (1985) indicated that
there is some link between stock returns and trading volumes and past trading volume might
provide valuable information about a security. The empirical work on the stock price-volume
relation focused on the study of relationship between stock returns and trading volumes. Vector
auto regression model was used in the research for the analysis. Blume, Easley, and O`Hara
(1994) have highlighted that volume captures the important information contained in the quality
of the trader`s information signals and be useful in interpreting information contained in prices.
Due to lack of information contained in prices, traders cannot obtain the full information signal
from price and could use volume as an additional statistic to observe that signal. Market
participants, therefore, condition their expectations about price movements on volume as well as
price. Trading volume and stock returns both are tested and with each other in both ways but the
significant number of researchers have supported that the trading volume could be used as an
indicator for return calculations, Christos Floros and Dimitrios V. Vougas (2007).
As the relationship between the variables got enough evidence in its support researcher and
analyst conduct the work on large sample size by involving multiple stock markets, Chen et al.
(2001) conducted a comprehensive study examining casual relation between stock returns,
trading volumes and volatility using daily data for nine major markets: New York, Tokyo,
London, Paris, Toronto, Milan, Zurich, Amsterdam and Hong Kong, they documented strong
evidence for the argument that return causes volume. However, they were able to uncover only
limited evidence to suggest that volume causes return. Malabika Deo, K.Srinivasan and K.
Devanadhen (2008) examines the interaction of stock market returns, trading volume and
volatility for select Asia-Pacific Stock Market – India, Hong Kong, Indonesia, Malaysia, Korea,
Tokyo and Taiwan. Their finding again supported the proposition and suggests that the returns
are influenced by volume and volume is influenced by returns for most of the markets.
Therefore, trading volume contributes some information to the return and volatility which after
wards again hits the trading volumes. Gunduz and Hatemi-J (2005) investigated central and
eastern Europe markets: Budapest, Istanbul, Moscow, Prague and Warsaw. They used weekly
data on price indices, trading volumes. The authors reported link between price and volume in
Hungury, Poland and some relationship in Russia and Turkey. However, no relationship was
found between price and volume in Czech Republic. Pisesdtasalasi & Gunasekarage (2003)
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