Return-volume Relation in the Tail: Evidence from Six Emerging Markets

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This paper provides empirical evidence about daily return and trading volume relation for six emerging markets, including Argentina, Chile, Malaysia, Mexico and Thailand. I use bivariate threshold theory to explicitly model the joint distribution of absolute return and trading volume. I find overall a positive correlation between absolute return and trading volume. Five out of six countries have weaker but still significant correlations based on the observations exceeding optimal thresholds. I also find for all the six countries, the return and volume relation is asymmetry, i.e., the correlation associated with positive return and volume is greater than the correlation between negative return and volume. For four out of six countries in the sample, the results from the bivariate threshold model show that during extreme price movement, this asymmetry correlation still holds.