The effect of trading volume on stock return: Evidence of shanghai and Shenzhen stock exchange

Benameur, Abdelhak; Benkhedda, Zineb; Benbouziane, Rabia Meriem

مجلة البشائر الاقتصادية
Volume 8, Numéro 2, Pages 774-789
2022-08-31

The Effect Of Trading Volume On Stock Return: Evidence Of Shanghai And Shenzhen Stock Exchange

Authors : Benameur Abdelhak . Benkhedda Zineb . Benbouziane Rabia Meriem .

Abstract

This study examines the effect of trading volume on stock return of shanghai (SSE) and Shenzhen stock exchange (SZSE) in the Chinese market. The data set comprises daily composite index from 04/01/2007 to 27/12/2019 for shanghai stock exchange, while Shenzhen stock exchange (SZSE) from 12/27/2012 to 27/12/2019, using the augmented Dickey-Fuller (ADF) test and the Phillips-Perron (PP) test, Descriptive statistics and jarque-bera test. Moreover, Granger causality tests were used to check the causality relationship between trading volume and stock returns. Furthermore, the study test the causality of cross-markets SSE and SZSE. Thestudy choose a GARCH (2,2) model to test the contemporaneous and lagged relationship for last 5 days between trading volume, stock return and volatility. The results of granger causality test found that there is a positive and significant causal impact in only one direction from the trading volume to the stock return in the Shanghai stock exchange while in the Shenzhen stock exchange there is a significant and positive causal impact from stock returns to the trading volume. The GARCH (2,2) model results show that there is significant and positive contemporaneous relationship in SSE and negative contemporaneous relationship in SZSE. Thus, there is no lagged relationship between the variables which means that the mixture distribution hypothesis is applicable in the Chinese markets as well the information arrive simultaneously; the trading volume and return are affected by the arrival of new information to the stock market, the Chinese market is efficient not affected by historical information (Semi strong level of efficiency).