Abstract
Using weekly data from the Indian stock market, we examine the relationship between stock price and trading volume. Our framework is Markov Switching-Vector Error Correction Model (MS-VECM). We justify the use of nonlinear model using the Brock, Dechert and Scheinkman (BDS) test and the information criteria. The long-run dynamics are characterised by one cointegrating vector relating the price to trading volume. We find that stock price is weakly exogenous only in the high volatility regime. The MS-VECM with two regimes provides a good characterisation of the Indian stock market and performs well relative to the other linear and nonlinear models. JEL Classification: C32, G12, E32
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
