THE RELATIONSHIP BETWEEN TRADING VOLUME AND STOCK RETURNS IN THE JSE SECURITIES EXCHANGE IN SOUTH AFRICA

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Raphael T Mpofu

DOI:10.22495/cocv9i4c2art1

Abstract

This study examines the relationship between trading volume and stock returns in the JSE Securities Exchange in South Africa. The study looked at the price and trading returns of the FTSE/JSE index from July 22, 1988 till June 11, 2012. The study revealed that stock returns are positively related to the contemporary change in trading volume. Further, it was found that past returns were not affected significantly by changes in trading volumes. The results present a significant relationship between trading volume and the absolute value of price changes. Autoregressive tests were used to explore whether return causes volume or volume causes return. The results suggest that volume is influenced by a lagged returns effect for the FTSE/JSE index. Therefore, return seems to contribute some information to investors when they make investment decisions.

Keywords: South Africa, FTSE/JSE, Trading Volume, Stock Returns

How to cite this paper: Mpofu, R. T. (2012). The relationship between trading volume and stock returns in the JSE securities exchange in South Africa. Corporate Ownership & Control, 9(4-2), 199-207. http://dx.doi.org/10.22495/cocv9i4c2art1