Testing the Contemporaneous and Causal Relationship between Trading Volume and Return in the Palestine Exchange

Marwan Darwish

Abstract


This study examines the causal relationship between return and trading volume in the Palestine Exchange. Using weekly trading volume and returns over the period from October 2000 to August 2010, the study employs GARCH (1,1) model to test the existence of the positive contemporaneous relationship. The study found that the relationship preserves after taking heteroskedasticity into account. Moreover, the results of Granger causality test show that there is bidirectional Granger causality between returns and trading volume, regardless of the measures of trading volume used.


Full Text: PDF DOI: 10.5539/ijef.v4n4p182

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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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