Evidence of Stock Returns and Abnormal Trading Volume: A Quantile Regression Approach

33 Pages Posted: 28 Jan 2015

See all articles by Cathy W. S. Chen

Cathy W. S. Chen

Feng Chia University - Department of Statistics; Graduate Institute of Statistics & Actuarial Science, Feng Chia University

Mike K. P. So

Hong Kong University of Science & Technology (HKUST) - Department of Information Systems, Business Statistics & Operations Management

Thomas Chinan Chiang

Drexel University - Department of Finance

Date Written: November 8, 2014

Abstract

This paper presents a CAPM-based threshold quantile regression model with GARCH specification to examine relations between stock excess returns and “abnormal trading volume.” By employing the Bayesian MCMC method with asymmetric Laplace distribution to six daily Dow Jones Industrial stocks, the proposed model captures asymmetric risk through market beta and volume coefficient that change discretely between regimes that are driven by market information and various quantile levels. This study finds significantly negative effects of abnormal volume on stock excess return under low quantile levels, nevertheless there are significantly positive effects under high quantile levels. The evidence indicates that each market beta varies with different quantile levels, capturing different states of market conditions.

Keywords: Quantile regression; Volume Asymmetric; GARCH; HP-filter; Market beta; MCMC

JEL Classification: C11; C22; C51; C52

Suggested Citation

Chen, Cathy W. S. and So, Mike K.P. and Chiang, Thomas C., Evidence of Stock Returns and Abnormal Trading Volume: A Quantile Regression Approach (November 8, 2014). Available at SSRN: https://ssrn.com/abstract=2555900 or http://dx.doi.org/10.2139/ssrn.2555900

Cathy W. S. Chen (Contact Author)

Feng Chia University - Department of Statistics ( email )

100 Wen Hwa Road
Taichung, 407
Taiwan
886 4 24517250 ext 4412 (Phone)
886 4 24517092 (Fax)

HOME PAGE: http://myweb.fcu.edu.tw/~chenws/

Graduate Institute of Statistics & Actuarial Science, Feng Chia University

100 Wenhwa Road
Talchung
Taiwan
886 4-24517250 ext 4412 (Phone)
886 4-2517092 (Fax)

HOME PAGE: http://myweb.fcu.edu.tw/~chenws/

Mike K.P. So

Hong Kong University of Science & Technology (HKUST) - Department of Information Systems, Business Statistics & Operations Management ( email )

Clear Water Bay, Kowloon
Hong Kong

Thomas C. Chiang

Drexel University - Department of Finance ( email )

32nd & Chestnut Streets
Philadelphia, PA 19104
United States
215-895-1745 (Phone)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
285
Abstract Views
1,322
Rank
194,985
PlumX Metrics