بررسي روابط تجربي بين بازده سهام، تغيير بازده و حجم معامله در بورس

The Empirical Relationship between Stock Returns, Return Volatility and Trading Volume in the Tehran Stock Exchange Using GARCH and ARCH Modeling

Introduction Identifying factors that influence the price of shares and how pricing shares are one of the subjects discussed in financial management. In order to increase the shares value that is one of the major goals of the company, management needs awareness of the factors that influence market value of the company. There are many fields in accounting research, commercial strategy, economy and finance that use the values of stock market. Because investors donʹt have the same interpretation of the new information, stock prices may remain unchanged until information is revealed for the market. When this happens some investors interpret new information as good news and some other as bad news. So the price changes in fact reveales investors reaction averages to the news that is published. Also stock returns may only change if trading volume increases. In addition to stock returns, trading volume and return volatility also represent set of available relevant information in the market. Unlike the price and stock returns, change and reform investors expectations, always lead to an increase in trading volume that in fact represents collection of investorsʹ reactions to new news. More studies in stock market focus on the price of shares and its behavior during the time. But for some random and unpleasant characteristics stock prices, instead of stock prices often research focuses on stock returns. According to the existing information about the company, stock returns reflect investorsʹ expectations about future performance of the company. New information has caused to change investorsʹ expectations and in fact is the main reason for the shares price fluctuations. The participants in financial markets have been using next predicted returns between two periods as criteria for the lack of confidence in the market to increase their interests. Correct predicted future changes are very important for many assessments and pricing financial models. This study investigates the empirical relationship between stock returns, return volatility and trading volume using data from the Tehran Stock Exchange. The sample contains stock return and trading volume monthly data from Tehran Stock Exchange from 1377/07/01 through 1385/03/31. Research Questions or Hypothesis In this study our hypotheses are: Hi: Stock returns are positively associated with trading volume. H2: There is dual-causality relationship between Stock returns and trading volume. Methods The empirical methods used include cross-correlation analysis, unit-root tests, bivariate simultaneous equations regression analysis, GARCH modeling, VAR modeling and Granger causality tests. Results This study is based on studies done about stock market in other countries (the relation between stock returns, return volatility and trading volume). In this study in addition to investigating contemporaneous relations between variables, causal relationships are considered as well. The results revealed that there is dependence and relationship between stock returns and trading volume in Tehran Stock Exchange and awareness of the stock returns will improve short-term prediction of trading volume. On the other hand hypotheses of existing positive relationship between return volatility and trading volume is proved; also more interesting is that this relationship shows mono-causality relationship from return volatility to trading volume. Therefore, Tehran Stock Exchange can help shareholders for decision-making by presenting information about the reasons for return volatility. Discussion and Conclusion This study concluded with examining cotemporaneous and causality relationship that forecasts of one of these variables can be only slightly improved by knowledge of the other. On the other hand, the results of research indicate that there is a cotemporaneous relationship between return volatility and trading volume. Additionally, by applying Grangerʹs test for causality, is concluded that return volatility contains information about upcoming trading volume. The other findings in this study show that there is a weak evidence of existing contemporaneous relationship between return volatility and trading volume. The results show that there is a mono-causality relationship from stock returns to trading volume. That is, the knowledge of stock returns may improve short-term prediction of current or future trading volume (the opposite is not true). The trading volume and return volatility have mono-causality relationship from return volatility to trading volume. This result rejects previous findings that any kind of price changes for future deals is informative. The findings of the study also show that increase in stock returns will increase trading volume. The results achieved by the use of Granger Causality Test show mono-causality relationship between stock returns and trading volume. It means that the flow of information is not simultaneous, rather is in succession and entering new information does not follow a simultaneous process and Tehran Stock Exchange is not efficient. Findings of this study, in some respects, are different from previous studiesʹ findings. While previous studies only supported the contemporaneous relationship and weak correlation between stock returns and trading volume, we bound simultaneity and considerable dynamism in relations between these variables. Findings of this study can help to better understand stock market infrastructures, especially the emerging markets. Since Iran stock market in comparison with developed markets is weak and small, more comparative experimental study is needed. Variables like privatization, government policies and economic factors which may affect the relationship between stock returns and trading volume can be part of limitations in this study.