Investigation of Causal Relationship between Stock Prices and Trading Volume using Toda and Yamamoto Procedure

Authors

  • Sushil BAJAJ Chhaju Ram Memorial Jat College
  • Vibha DUA Institute of Marketing and Management

Keywords:

Stock Returns, Trading Volume, Causal Relationship, Toda and Yamamoto Procedure, Vector Autoregression

Abstract

The present study probes the relationship between the stock prices and trading volume. For achieving this purpose, daily data of adjusted closing stock prices, trading volume of 39 individual securities and S&P CNX Nifty from January 1, 1998 to May 31, 2013 have been used. In this study, instead of applying ordinary Granger causality test to investigate the relationship between stock prices and trading volume, Toda and Yamamoto (1995) procedure has been applied for analyzing the data. Lag length chosen by AIC and FPE criterion has been insured by running Lagrange Multiplier (LM) test and causality determined by Toda and Yamamoto test has also been confirmed by using VAR methodology. Although, Toda and Yamamoto and VAR test produced little dissimilar results, nevertheless, the empirical analysis provides sufficient grounds to declare the presence of interaction between stock prices and trading volume.

Published

30-11-2014

How to Cite

BAJAJ, S., & DUA, V. (2014). Investigation of Causal Relationship between Stock Prices and Trading Volume using Toda and Yamamoto Procedure. Eurasian Journal of Business and Economics, 7(14), 155-181. Retrieved from https://ejbe.org/index.php/EJBE/article/view/138

Issue

Section

Articles