The Relationship between Stock Price and Trading Volume: Evidence from Malaysia

Abstract

The ready uses daily return data on a sample of 220 Malaysian stocks for the period January 1992 December 1998 to investigate the relationship between stock return and trading volume. Both approach and the more robust Granger causality tests were adopted, with the former test preponderance of significant correlation between trading volume and stock return per se, between volume and the absolute value of stock return. Although the Granger causality tests support for a relationship, the evidence is much less preponderant. It also reveals that the causality is stronger when it runs from return (or absolute return) to volume than when it reverse direction. Furthermore, the strength of return in Granger-causing volume is found over time.