New Evidence on the Relation between Trading Volume and Volatility

Abstract

The paper tests the relationship between trading volume and return volatility within the scope of Mixture of Distribution Hypothesis and Sequential Information Arrival Hypothesis in Istanbul Stock Exchange (ISE) by using intraday data for the period between 04.02.2005 to 30.04.2010. Two sub-samples are used to consider the effect of Global crisis. The results show that findings differ across two sub-samples. The findings support the Mixture of Distribution Hypothesis in pre-crisis period. However, the evidence is mixed in crisis period. Although we reject the Mixture of Distribution Hypothesis in crisis period, we can not strongly reject the Sequential Information Hypothesis.