In this dissertation the relationship between trading volume and stock return
volatility is examined for the FTSE-20 Greek stocks. By using different
measures of return volatility and trading activity, this study investigates the
contemporaneous and the causal trading activity-volatility relation as well.
The main purpose of this paper is to explore not only if any relation between
these two variables exists but also if this relation is affected by the different
measures of volatility and trading activity used. Our calculations provide
evidence for a positive contemporaneous interaction and a feedback causal
relationship between the two variables. Furthermore, it is tested if volatility
persistence tends to disappear when the trading activity proxy is included in
the conditional variance equation. In accordance with the findings from the
US stock market our empirical results show that in the majority of cases
GARCH effects tend to disappear when trading activity is included in the
variance equation.
Submitted by alex trianti (atrianti@unipi.gr) on 2006-11-06T12:13:23Z
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University of Peiraeus
