Asymmetric relationship between implied volatility, index returns and trading volume: an application of quantile regression model

Siddiqui, Saif; Roy, Preeti

doi:10.1007/s40622-019-00218-5

Cited by 3 publications

(2 citation statements)

References 45 publications

(64 reference statements)

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“…Table 4, Panel A also shows a negative and significant relationship between the stock return volatility and turnover volatility for large capitalizations (À0.144). This result is consistent with Siddiqui and Roy (2019), who explain this negative relationship by investor risk aversion. Conversely, Table 4, Panel B shows a positive and significant relationship for the listed SMEs (0.291).…”

Section: Stock Returns and Trading Volumesupporting

confidence: 92%

“…Indeed, the causal effects of volume on return are heterogeneous across quantiles, and those of return on volume are more stable. More recently, Siddiqui and Roy (2019) demonstrate an asymmetric relationship of returns with changes in the volatility and trading volume under quantile regression models. The positive lagged effect of changes in the volatility on the trading volume supports the SIAH.…”

Section: Related Literaturementioning

confidence: 99%

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Another look at the asymmetric relationship between stock returns and trading volume: evidence from the Markov-switching model

Bouattour,

Miloudi

2023

RAF

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Purpose The purpose of this paper is to bridge the gap between the existing theoretical and empirical studies by examining the asymmetric return–volume relationship. Indeed, the authors aim to shed light on the return–volume linkages for French-listed small and medium-sized enterprises (SMEs) compared to blue chips across different market regimes. Design/methodology/approach This study includes both large capitalizations included in the CAC 40 index and listed SMEs included in the Euronext Growth All Share index. The Markov-switching (MS) approach is applied to understand the asymmetric relationship between trading volume and stock returns. The study investigates also the causal impact between stock returns and trading volume using regime-dependent Granger causality tests. Findings Asymmetric contemporaneous and lagged relationships between stock returns and trading volume are found for both large capitalizations and listed SMEs. However, the causality investigation reveals some differences between large capitalizations and SMEs. Indeed, causal relationships depend on market conditions and the size of the market. Research limitations/implications This paper explains the asymmetric return–volume relationship for both large capitalizations and listed SMEs by incorporating several psychological biases, such as the disposition effect, investor overconfidence and self-attribution bias. Future research needs to deepen the analysis especially for SMEs as most of the literature focuses on large capitalizations. Practical implications This empirical study has fundamental implications for portfolio management. The findings provide a deeper understanding of how trading activity impact current returns and vice versa. The authors’ results constitute an important input to build and control trading strategies. Originality/value This paper fills the literature gap on the asymmetric return–volume relationship across different regimes. To the best of the authors’ knowledge, the present study is the first empirical attempt to test the asymmetric return–volume relationship for listed SMEs by using an accurate MS framework.

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Section: Stock Returns and Trading Volumesupporting

confidence: 92%

Section: Related Literaturementioning

confidence: 99%