Information flow between stock return and trading volume: the Tunisian stock market

ISSN： 1460-6712

Source： International Journal of Financial Services Management, Vol.5, Iss.1, 2011-01, pp. : 52-82

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Abstract

This paper investigates the dynamics of information flow between stock return and trading volume in the Tunisian Stock Market (TSE) using intraday data covering the year 2006. The Cross-Correlation Function (CCF) suggested by Cheung and Ng is employed to detect the causality in mean and in variance between stock return and trading volume. Our results reveal that contrary to the Mixture of Distribution Hypothesis (MDH), only a few Tunisian stocks display instantaneous correlations in mean and in variance between trading volume and stock return. However, strong evidence of 'lead-lag' linkages in mean and in variance in major Tunisian stocks is found. This result supports the Sequential Information Arrival Hypothesis (SIAH) of Copeland (1976). Also, our results pointed out that the information flow in the TSE follows a sequential rather than simultaneous process indicating the rejection of the informational efficiency hypothesis.