dc.description.abstract | This study intended to examine the dynamic relationship between stock pnces and
trading volume of firms listed at the NSE. In addition, the study reveals the nature and
direction of this relationship. Trading volume is measure of the quantity of securities that
change owners' hands in any given trading day at the Securities Exchange. Stock price
represents the most recent price at which the stock last traded. The higher the volume the
higher is the level of interest in the security at its prevailing price.
The research design used was a correlation study and the population comprised of all the
58 firms listed at the NSE by December 31, 2012. The study covered the period 151
January, 2008 to 31st December, 2012. Secondary data for the period was collected from
Mystocks, a company that does Real-time data streaming for NSE. The data for the
population was first analyzed at the segmental level and thereafter for the combined 58
firms. Trading volume was measured by the weekly averages of the traded volumes and
the stock returns by the weekly average percentage change in price. A regression model
proposed by Lee and Rui (2002) was used to carry out the analysis in order to establish if
a contemporaneous relationship exist between trading volume and stock prices.
The overall coefficients of R2 and adjusted R2 were below 0.5 indicating that major
variations of stock prices and trading volume were explained by other factors as opposed
to the relationship between the two variables. It was concluded that a weak correlation
exists between trading volume and stock prices of firms listed at the NSE as the overall
coefficient of Correlation R was also below 0.5.
The study recommended that it will be wise for financial managers, investment advisors
and other policy makers to ensure that they pay very close attention to other factors
especially fundamental, technical as well as prevailing market sentiments before making
investment decisions. This would help to minimize poor investment decisions occasioned
by mere observation of the movements in stock prices and trading volume of firms listed
at the NSE. | en_US |