The paper determines the empirical relationship between risk, return and trading volume in the Karachi Stock Exchange (KSE) using the GARCH-M technique, and data for the time period December 1991 to December 2010. The paper contributes by introducing the trading volume as a proxy for the flow of information to explain the return in Pakistan’s stock exchange. Such information affects, at the same time, risk and return. The work considers a long time period, based on daily data. This study attempts to incorporate the changing settlement period during the study period. Results show that daily return volatility is time-varying and highly persistent. Contemporaneous changes in trading volume have a positive effect on returns. The previous day’s change in trading volume affects the conditional volatility of returns positively. Therefore, trading volumes have positive information content in predicting returns in all settlement periods except settlement period T+2. Moreover, as settlement period reduced, the day of the week anomalies disappeared, as identified by Nishat and Mustafa (2002). If settlement period T+1 is introduced, we expect that weekdays anomalies will disappear.

(2010). Risk, return and trading volume relationship in an emerging stock market: a case study of Karachi stock exchange [journal article - articolo]. In SAVINGS AND DEVELOPMENT. Retrieved from http://hdl.handle.net/10446/27460

Risk, return and trading volume relationship in an emerging stock market: a case study of Karachi stock exchange

2010-01-01

Abstract

The paper determines the empirical relationship between risk, return and trading volume in the Karachi Stock Exchange (KSE) using the GARCH-M technique, and data for the time period December 1991 to December 2010. The paper contributes by introducing the trading volume as a proxy for the flow of information to explain the return in Pakistan’s stock exchange. Such information affects, at the same time, risk and return. The work considers a long time period, based on daily data. This study attempts to incorporate the changing settlement period during the study period. Results show that daily return volatility is time-varying and highly persistent. Contemporaneous changes in trading volume have a positive effect on returns. The previous day’s change in trading volume affects the conditional volatility of returns positively. Therefore, trading volumes have positive information content in predicting returns in all settlement periods except settlement period T+2. Moreover, as settlement period reduced, the day of the week anomalies disappeared, as identified by Nishat and Mustafa (2002). If settlement period T+1 is introduced, we expect that weekdays anomalies will disappear.
articolo
2010
Cette étude détermine la relation empirique entre le risque, le rendement et le volume des transactions à la Bourse de Karachi en utilisant la technique GARCH-M, et des données pour la période Décembre 1991 - Décembre 2010. L’étude introduit le volume des transactions en tant que proxy pour le flux d’information pour expliquer le rendement à la Bourse du Pakistan. Ces informations affectent en même temps le risque et le rendement. L’étude considère une longue période, sur la base de données quotidiennes. Cette étude tente d’intégrer l’évolution de la période de règlement au cours de la période d’étude. Les résultats montrent que la volatilité du rendement quotidien est variable dans le temps et très persistante. Les changements contemporains du volume des transactions ont un effet positif sur le rendement. Le changement du volume des transactions le jour précédent affecte positivement la volatilité conditionnelle des rendements. Par conséquent, les volumes de transactions ont un contenu d’information positif dans la prévision des rendements dans toutes les périodes de règlement; sauf période de règlement T+2. En outre, lorsque la période de règlement a été réduite, les anomalies “the-day-of-the-week” ont disparu, tels qu’identifiées par Nishat et Mustafa (2002). Si la période de règlement T +1 est introduite, nous espérons que les anomalies semaine vont disparaître.
Mustafa, Khalid; Nishat, Mohammed
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/27460
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