Author(s)

Ki-Hong Choi, Zhu-Hua Jiang, Sang Hoon Kang, Seong-Min Yoon

Department of Business Administration, Pusan National University, Busan, Korea.
Department of Economics, Pusan National University, Busan, Korea.
Research Institute of Social Criticality, Pusan National University, Busan, Korea.

We investigated the relationship between return volatility and trading volume as a proxy for the arrival of information to the market, based on Korean stock market (KSM) data from January 2000 to December 2010. We measured the rela- tionship between return volatility and trading volume using the GJR-GARCH and exponential GARCH (EGARCH) models. We found a positive relationship between trading volume and volatility, suggesting that trading volume influ- ences the flow of information to the market. This finding supports the validity of the mixture of distributions hy-pothesis. Considering that trading volume can also explain volatility asymmetry, we conclude that trading volume is a useful tool for predicting the volatility dynamics of the KSM.

Asymmetry; Volatility; Trading Volume; Mixture of Distribution Hypothesis

K. Choi, Z. Jiang, S. Kang and S. Yoon, "Relationship between Trading Volume and Asymmetric Volatility in the Korean Stock Market," Modern Economy, Vol. 3 No. 5, 2012, pp. 584-589. doi: 10.4236/me.2012.35077.