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DYNAMIC STOCK RETURN–VOLUME RELATION: EVIDENCE FROM EMERGING ASIAN MARKETS

Authors


Hsin-Yi Lin, Department of Economics, National Chengchi University, Taipei 116, Taiwan. Tel: +886-2-29393091 ext. 51547; Fax: +886-2-29390344; Email: linh@nccu.edu.tw. The author is grateful to two anonymous referees, an associate editor, and Editor-in-Chief Gabriel Talmain for valuable comments. The author also thanks Professor Chung-Ming Kuan for helpful comments about this paper.

ABSTRACT

This paper empirically examines the dynamic stock return–volume relations for six emerging Asian markets: Indonesia, Malaysia, Singapore, South Korea, Taiwan, and Thailand. Evidence is found that trading volume Granger causes stock return in quantiles and the causal effects of volume are heterogeneous across quantiles. This shows that volume carries some information to the return and could be interpreted in light of theoretical models. In addition, we find that there is bi-directional causality between stock return and trading volume in most of the markets. The finding indicates that those Asian emerging markets with different institutions and information flows than more mature markets have present similar causal effects on the stock return–volume relation. Furthermore, the cross-country evidence shows that the US market helps to predict the returns of the emerging Asian markets.

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