PRICE-VOLUME RELATIONSHIP IN THE STOCK EXCHANGE OF SINGAPORE

Abstract

Many studies have been done on the stock returns in the stock markets of the United States and the United Kingdom. Researchers have paid relatively little attention to the distribution of trading volume, and the relationship between trading volume and stock returns. This is particularly true in the local context. This exercise attempts to fill the gap by studying trading volume together with stock returns in the Stock Exchange of Singapore. Of particular interest is the question of predictability. If stock returns can be predicted using information on past returns and trading volume, systematic gains can be reaped, thereby refuting the efficient market hypothesis. On the other hand, if returns cannot be predicted, then the claims of many technical analysts cannot be substantiated. This exercise attempts to test these opposing views. In doing so, the Granger definition of causality is used. Also examined are the correlation and asymmetrical property between stock returns and trading volume.