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Stock Prices and Volume

A. Ronald Gallant1; Peter E. Rossi2; George Tauchen3

1 North Carolina State University · 2 University of Chicago · 3 Duke University

Review of Financial Studies 1992 open access

We undertake a comprehensive investigation of price and volume co-movement using daily New York Stock Exchange data from 1928 to 1987. We adjust the data to take into account well-known calendar effects and long-run trends. To describe the process, we use a seminonparametric estimate of the joint density of current price change and volume conditional on past price changes and volume. Four empirical regularities are found: (i) positive correlation between conditional volatility and volume; (ii) large price movements are followed by high volume; (iii) conditioning on lagged volume substantially attenuates the “leverage” effect; and (iv) after conditioning on lagged volume, there is a positive risk-return relation.

DOI
10.1093/rfs/5.2.199
Volume
5 (2)
Pages
199-242
Language
en
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