Abstract:
The relationship between trade volume, market return and market return volatility is complex and this research paper attempts to eliminate any ambiguity in the relationship. The sample data of daily stock returns and trade volume was taken from Karachi Stock Exchange 100 (KSE100) best companies from January 04, 1999 to May 31, 2011. KSE100 includes stock of companies from all industrial sectors of Pakistan, which removes conservative approach in evaluating data. Generalized autoregressive conditionally hetroscedastic (GARCH) is used to help investors understand the relationship. The research uses four different models in GARCH for comprehensive results. The relationship is determined using lagged & current trade volume and lagged & current market returns. The paper also includes how arrival of new information influences investing patterns of investors.
