A Comparative Analysis on the Volume-Return Relationship of the ETF and Stock Market
Takming University of Science and Technology - Department of Banking and Finance
University of Maryland Eastern Shore - School of Business and Technology
April 28, 2014
Journal of Trading, Forthcoming
This paper aims to examine the contemporaneous relationship between trading volume and returns in the ETF market taking the stock market as a contrast. While past research using correlation analysis and OLS method to specify a linear regression model only catches the average relationship between volume and return, this paper applies the quantile regression analysis to provide a more complete description for the volume-return relationship in the ETF and stock markets. The empirical results show that a symmetric volume-return relationship is found in the ETF market and an asymmetric volume-relationship, however, is discovered in the stock market. The volume-return relationship of the stock market has become more symmetric after the exempt for some stock from the short-sale restriction. The results demonstrate that the transaction cost and the short-sale restriction are important factors to influence the patter of volume-return relationship.
Number of Pages in PDF File: 28
Keywords: Trading volume, return, quantile regression
JEL Classification: G12, G14
Date posted: April 29, 2014 ; Last revised: March 19, 2015
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