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Article

A Comparative Analysis on the Volume-Return Relationship of the Exchange-Traded Fund and the Stock Market

Jung-Chu Lin and Vichet Sum
The Journal of Trading Spring 2015, 10 (2) 5-22; DOI: https://doi.org/10.3905/jot.2015.10.2.005
Jung-Chu Lin
is an associate professor in the Department of Banking and Finance at Takming University of Science and Technology in Taipei City, Taiwan.
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  • For correspondence: melody@takming.edu.tw
Vichet Sum
is an associate professor and interim chair at the University of Maryland Eastern Shore’s School of Business and Technology in Princess Anne, MD.
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  • For correspondence: vsum@umes.edu
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Abstract

This article aims to examine the contemporaneous relationship between trading volume and returns in the Taiwan exchange-traded fund (ETF) market, taking the stock market as a contrast. Whereas past research using correlation analysis and ordinary least squares method to specify a linear regression model catches only the average relationship between volume and return, this article applies the quantile regression analysis to provide a more complete description for the volume-return relationship in the ETF and stock markets. The empirical results show a symmetric volume-return relationship in the ETF market and an asymmetric volume-relationship in the stock market when the short-sale uptick rule is still applicable for all listed stocks. The volume-return relationship of the stock market became more symmetric after the elimination of the uptick rule on short sales for high-cap stocks and, at last, for the entire listed stocks. The results demonstrate that transaction costs and the short-sale restriction are important factors in influencing the pattern of the volume-return relationship.

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The Journal of Trading: 10 (2)
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A Comparative Analysis on the Volume-Return Relationship of the Exchange-Traded Fund and the Stock Market
Jung-Chu Lin, Vichet Sum
The Journal of Trading Mar 2015, 10 (2) 5-22; DOI: 10.3905/jot.2015.10.2.005

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A Comparative Analysis on the Volume-Return Relationship of the Exchange-Traded Fund and the Stock Market
Jung-Chu Lin, Vichet Sum
The Journal of Trading Mar 2015, 10 (2) 5-22; DOI: 10.3905/jot.2015.10.2.005
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