A Comparative Analysis on the Volume-Return Relationship of the ETF and Stock Market

Journal of Trading, Forthcoming

28 Pages Posted: 29 Apr 2014 Last revised: 19 Mar 2015

Jung-Chu Lin

Takming University of Science and Technology - Department of Banking and Finance

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Date Written: April 28, 2014

Abstract

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.

Keywords: Trading volume, return, quantile regression

JEL Classification: G12, G14

Suggested Citation

Lin, Jung-Chu and Sum, Vichet, A Comparative Analysis on the Volume-Return Relationship of the ETF and Stock Market (April 28, 2014). Journal of Trading, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2430537 or http://dx.doi.org/10.2139/ssrn.2430537

Jung-Chu Lin

Takming University of Science and Technology - Department of Banking and Finance ( email )

No. 56, Sec. 1, Huanshan Rd., Neihu District,
Taipei City, 11451
Taiwan
886-2-26585801 (Phone)

Vichet Sum (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)

HOME PAGE: http://www.umes.edu/bma/Sum.html

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