STOCK RETURNS VERSUS TRADING VOLUME: IS THE CORRESPONDENCE MORE GENERAL?

This paper presents a quantitative analysis of the relationship between the stock market returns and corresponding trading volumes using high-frequency data from the Polish stock market. First, for stocks that were traded for sufficiently long period of time, we study the return and volume distributions and identify their consistency with the power-law functions. We find that, for majority of stocks, the scaling exponents of both distributions are systematically related by about a factor of 2 with the ones for the returns being larger. Second, we study the empirical price impact of trades of a given volume and find that this impact can be well described by a square-root dependence: r(V) similar to V-1/2. We conclude that the properties of data from the Polish market resemble those reported in literature concerning certain mature markets.