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Trading volume and serial correlation in stock returns in an emerging market: a case study of Pakistan
Philippine Review of Economics
View Archive Info| Field | Value | |
| Title |
Trading volume and serial correlation in stock returns in an emerging market: a case study of Pakistan
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| Creator |
Nishat, Mohammed; Institute of Business Administration, Karachi
Mustafa, Khalid; Department of Economics, University of Karachi |
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| Subject |
stock trading; autocorrelation; information
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| Description |
This paper examines the relationship between aggregate stock market trading volume and serial correlation of daily stock returns from December 1991 to April 2006. The empirical results reveal that there is a first-order positive autocorrelation between future and present returns. The serial correlation becomes negative when present returns are weighted by a change in the trading volume. This indicates that the non-informational trade has a significant effect on prices and trading activity in Karachi stock market in addition to present returns, nonlinear volume, and volatility. The results implied that stock market return moved too much due to change in the fundamentals, aggregate expected returns, and changes in effective risk aversion of market participants. Moreover, the same results are found in pre-reforms period (December 14, 1991, to December 31, 2000), post-reforms period (January 01, 2001, to April 2006), before 9/11 events (December 14, 1991, to September 10, 2001), and after 9/11 events (September 10, 2001 to April 21, 2006). The test results for second-order autocorrelation indicate a positive and weak relationship between future and present returns as compared to first-order autocorrelation. However, it is positive when it relates to trading volume in the entire sample period and four subsample periods. This infers that the role of information is effective after two days, but non-informational role is less effective in this duration. JEL classification: C01, C22
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| Publisher |
Philippine Review of Economics
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| Contributor |
—
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| Date |
2010-09-28
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion Peer-reviewed Article |
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| Format |
application/pdf
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| Identifier |
http://www.econ.upd.edu.ph/pre/index.php/pre/article/view/179
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| Source |
Philippine Review of Economics; Vol 45, No 2 (2008)
1655-1516 |
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| Language |
eng
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| Relation |
http://www.econ.upd.edu.ph/pre/index.php/pre/article/view/179/642
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| Rights |
Copyright (c) 2018 Philippine Review of Economics
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