The Causality Between Stock Index Returns and Volumes in the Asian Equity Markets‪.‬

ABSTRACT This investigation empirically examines the relation between daily rates of return and trading volumes on the stock market indices of six developing markets from Asia over the recent 34-month period ending in October 2005. The evidence of these markets supports the view that rising markets are accompanied by rising volumes and vice versa. The volume-return relation is found to depend on the direction of the market itself. The volume-absolute return relation is found to be significantly positive. The Granger causality tests find the absence of causality running in either direction in four of the six markets. In South Korean market, the evidence of causality running from returns to volume is found while the causality running in the diametrically opposite direction is uncovered in the Taiwanese market.