An Empirical Analysis of Bank Stock Volatility and Trading Volume: Malaysian Evidence

Abstract

This paper investigates whether trading volume contain information to predict daily stock returns volatility banks traded on the Kuala Lumpur Stock Exchange and the financial index. Two competitive that provide theoretical explanation for the observed correlation between price variability and volume are tested. Using GARCH model, the findings provide strong evidence supporting for mixture of distribution hypothesis' (MDH) casting doubt on predictability power of trading volume volume volatility. The finding also suggests the possibility of other variables beside trading volume can explain current volatility for banks with thin trading volume The finding also suggests the possibility of other variables beside trading volume can explain current volatility for banks with thin trading volume