Batrinca, B; Hesse, CW; Treleaven, PC; (2018) Examining drivers of trading volume in European markets. International Journal of Finance and Economics , 23 (2) pp. 134-154. 10.1002/ijfe.1608.

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Abstract

This study presents an in-depth exploration of market dynamics and analyses potential drivers of trading volume. The study considers established facts from the literature, such as calendar anomalies, the correlation between volume and price change, and this relation's asymmetry, while proposing a variety of time series models. The results identified some key volume predictors, such as the lagged time series volume data and historical price indicators (e.g. intraday range, intraday return, and overnight return). Moreover, the study provides empirical evidence for the price–volume relation asymmetry, finding an overall price asymmetry in over 70% of the analysed stocks, which is observed in the form of a moderate overnight asymmetry and a more salient intraday asymmetry. We conclude that volatility features, more recent data, and day-of-the-week features, with a notable negative effect on Mondays and Fridays, improve the volume prediction model.

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