Abstract
Millions of shares traded daily on the stock market. Factors influencing the number of transactions that will be remembered as the Trading Volume has been of interest to investors and analysts. The main source of information used for this purpose, is the company’s financial indicators. The indicators include profitability ratios, liquidity ratios, debt ratios, efficiency ratios and stock market ratios. The purpose of this study was to evaluate the effectiveness of the financial indicators on trading volume of 67 companies listed in Tehran Stock Exchange during the period 3/21/2010 to 3/20/2014. For this purpose, using Hierarchical Multiple Regression to examine each hypothesis, the relationship between the ratio and trading volume with control variables (year, industry, inflation and exchange rates) examined and on the basis of significance level was evaluated. Then on the basis of factor in each group based on assumptions, most prominent were identified and selected on the end of an overall regression was performed. The results indicate that liquidity and performance indicators are significantly related to trading volume. Also the results indicate that the most significant proportion of the working capital of a company that has the greatest impact on trading volume. In addition, the year, industry and exchange rates have a significant effect on the control variables, had a significant effect in the case of this study, then effect of them was controlled and eliminated.
Highlights
Trading volume is a measure to determine the amount of financial assets are traded in a given time period
The results show that unexpected changes in the profitability ratios are main source of abnormal stock returns, but none of the unexpected changes in the financial dimensions that have a significant effect on abnormal trading volume and it indirectly affected by the abnormal returns
The results showed that the profitability was not statistically significant with trading volume
Summary
Trading volume is a measure to determine the amount of financial assets are traded in a given time period. Several papers have been written about the trading activity in financial markets and different measures as trading volume is studied. Study trading volume due to his ties with other indicators of stock market is important. That in the stock markets of New York, London and Tokyo exist positive feedback relationship between trading volume and return volatility. The analysis show evidence of stronger spillover effects after the 1987 market crash and increased importance of trading volume as an information variable, especially after the introduction of options in the America and Japan (Lee & Rui, 2002). There is a correlation between the volatility of stock returns and trading volume (Park, 2010). Trading volume has some predictive power for high volume firms and in certain industries of the Australian market
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