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
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, G14working papers series
Date posted: April 29, 2014 ; Last revised: May 4, 2014
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