Revisiting Volume-Volatility Relationship: Evidence from India

10 Pages Posted: 19 Jan 2007

See all articles by Pradeep K Mavuluri

Pradeep K Mavuluri

Big Data Scientist, Consultant, Faculty, Econometrician; Hyderabad Central University

Nagarjuna Boppana

University of Hyderabad - School of Economics

Date Written: August 25, 2006


Positive relationship between trade volume and return volatility is a well-known empirical verified regularity in the financial research. Several studies examined what causes to volume-volatility to evolve and numerous theoretical explanations have been developed to predict/explore this relationship (see Karpoff (1987) and Board et al (1990) for a number of reasons why price-volume affiliation is positive). However, the recent literature provides evidence of revisiting the volume-volatility relationship as volatility and transaction counts relationship. So far no study examines the role of transactions frequency over and above volume in explaining the volatility; hence, the present study attempts to uncover the relevance of transaction counts for Indian stock market. Specifically, the study considers component stocks of Indian barometer indices, NSE Nifty and Nifty Junior, for the period 2005. In addition, study measures volatility by five minute intra day volatility apart from traditional absolute and squared price changes. Volume is measured as average trade size. The basic hypotheses that the number of transactions drives the volatility rather than the volume has been examined by the cross-sectional averages of Nifty & Nifty Junior stocks after running time series regressions.

Keywords: Volume, Volatility and Transaction Counts

JEL Classification: C10, C13, G10, G12

Suggested Citation

Mavuluri, Pradeep Kumar and Boppana, Nagarjuna, Revisiting Volume-Volatility Relationship: Evidence from India (August 25, 2006). Available at SSRN: or

Pradeep Kumar Mavuluri (Contact Author)

Big Data Scientist, Consultant, Faculty, Econometrician ( email )

Bangalore, 560066

Hyderabad Central University ( email )

Bangalore, 560066

Nagarjuna Boppana

University of Hyderabad - School of Economics ( email )

Hyderabad-046, Andhra Pradesh 500046

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