Causality and Volatility in the Firm Level Stock Returns and Volume in India : Evidence from National Stock Exchange

The present study has undertaken a comprehensive investigation of co-movement in stock returns and volume change using daily National Stock Exchange data for twenty-one listed firms from 1996 to 2005. It is observed that the direction of causality between stock returns and volume change vary over different periods and across firms. Generally there are casual relationships between volume and price over the full period. Once we take the three sub periods the relationships starts to weaken over the sub periods for most of the stocks. The study further indicates that most of the companies do not show long-term spillover effect on volatility as evident generally in short run. However, some major players in Indian Stock market show evidence of long term spillover volatility effect. The study indicates towards the presence of inefficiencies on the National Stock Exchange, which weakens in the later sub-period