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Loredana Ureche-Rangau, Fabien Collado and Ulysse Galiay
''The dynamics of the volatility – trading volume relationship: New evidence from developed and emerging markets''
( 2011, Vol. 31 No.3 )
This paper empirically investigates whether there is an evolution in the relation between stock market trading volume and volatility in 23 developed and 15 emerging markets. To answer this question, we develop a dynamic application of the TARCH (1, 1) model and first prove that the relationship is variable through time. Then, we focus our analysis on three major financial events, namely the Asian Crisis, the Dot Com bubble burst and the Subprime crisis. We find that the explanatory power of volume is greater during these periods. Finally, we show that the sign of the relationship cannot be clearly set for a specific country or sub group of developed or emerging markets.
Keywords: Mixture of distribution hypothesis, TARCH model, Conditional variance, Trading volume
JEL: F3 - International Finance: General
Manuscript Received : Mar 28 2011 Manuscript Accepted : Sep 09 2011

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