Relationship between trading volume, stock return and return volatility: A case of Nepalese insurance companies

  Volume 2      Issue 2       Dec 2019      ISSN: 2565-4942(P),  2738-9693(O)      

https://doi.org/10.3126/njiss.v2i2.31827

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Govind Jnawali, Lecturer of statistics at Butwal Multiple Campus, Tribhuvan University. Corresponding author, Email: [email protected]

Amrita Jaiswal Jaiswal, MBA Scholar at Lumbini Banijya Campus, Tribhuvan University.

Email: [email protected]

Abstract

 

This study examines the relationship of trading volume with stock return and return volatility in the context of Nepalese insurance companies. The study is based on secondary data of 19insurance companies with 114 observations for the period from 2013/14 to 2018/19. The result shows that trading volume and past trading volume have positive impact on stock return. It indicates that increase in trading volume and past trading volume leads to increase in stock return. Similarly, the result reveals that the market capitalization and firm size have positive impact on stock return. On the contrary, book values per share and turnover rate have positive impact on the return volatility. Similarly, past trading volume has a negative impact on return volatility. It indicates that increase in past trading volume leads to decrease in return volatility. The study concludes that trading volume and past trading volume have significant impact on the stock return and return volatility of insurance companies. The study also concludes that past trading volume followed by turnover rate is the most dominant factor that explains the changes in stock return in the context of Nepalese insurance companies. This study would enable the present investors to settle on informed choices since they would almost certainly foresee the patterns in share price movements just as profits of the organizations. This would include considering the trading volume and the stock return to improve the investor wisdom to invest in NEPSE.

Keywords: Stock return, trading volume, past trading volume, volatility, turnover rate, market capitalization, firm size and book value per share.