Journal of Trading, Forthcoming
28 Pages Posted: 29 Apr 2014 Last revised: 19 Mar 2015
Date Written: 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.
Keywords: Trading volume, return, quantile regression
JEL Classification: G12, G14
Suggested Citation: 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