“Relationship Between The Volume Of Trade And Volatility Spillover Between The Selected Developed And Emerging Asian Markets”

Abstract

Stock markets serve as the economic barometers. The relationship between the two capital markets can be studied as a proxy to understand the relation between the two economies. The movement of stock market not only reflects the nation’s economic condition but also the confidence level the domestic and foreign investors have in an economy. The increase in integration between the global economies has resulted in convergence and co movement. The purpose of this study is to examine relationship between the volume and volatility in the capital markets of Hong Kong, Japan, Singapore, India, China and Philippines. Stratified- convenience sampling technique is used to pick the samples and daily index values are taken from the major index of these countries for a period of seven years. The time series data were tested for stationarity and normality using ADF, PP tests and Jarque-Bera test. Returns, SD, Granger causality test, VAR model and Variance decomposition techniques are used for the analysis. The response of volatility to its own shock is comparatively higher and is found to marginally increase from periods one to ten than the shock due to its trading volume and the impact of Volume is relatively lesser on volatility in majority of the stock markets. The financial stock markets are integrated beyond the geographical borders and the shock in one market impacts the returns from the other market. With a better understanding of the relation between the markets and volatility and volume, the investors can make strategy to trade, by observing the volatility signals in one market, suitable positions can be taken in the other.