Evaluating The Effectiveness of The GARCH-ARMA Model in Examining The Heterogeneity of Noise Shareholder Behavior Based on The Price-Volume Relationship During The Crisis, Before and after that
Subject Areas : Financial EconomicsMohammad Hasan Saleh 1 , Fazel MohammadiNodeh 2 * , Mojtaba Maleki Choubari 3
1 - Department of Accounting, Qazvin Branch, Islamic Azad University, Qazvin, Iran
2 - Department of Management, Lahijan Branch, Islamic Azad University, Lahijan, Iran
3 - Department of accounting, Lahijan Branch, Islamic Azad University, Lahijan, Iran
Keywords: Trading volume, Stock returns, Granger Causality, Average Causality, Variance Causality,
Abstract :
During the crisis, market participants may interpret financial information differently because the occurrence of structural failures in market prices causes them to show asymmetric behavior towards their trading strategies due to their emotions and reaction to the market trend. Therefore, the purpose of this study is to investigate and compare the effect of trading volume on the stability of return volatility, during the crisis, before and after the strictly bearish of the TSE index. Based on daily data from April 2020 to April 2021, structural break points were first determined and in different price regimes, 3 different periods were identified. The Cross-Correlation-Function showed that most of the significant lag orders, before and after the crisis, indicate that the causality in the variance is related to the previous trading volume on the current return and between the residuals squared standard past trading volume and current return. There are inconsistent signs of these correlations that serve as convincing evidence of the noise traders nature. before the crisis, both volatilities in past trading volume and current returns showed a positive correlation as well as a negative correlation in the short run. Based on the crisis data, no spillover volatility effect was observed, which indicates the presence of noise traders because they have a pessimistic belief that they can not express their belief about future returns in a logical way. In the post-crisis period, both volatilities in past trading volume and current returns are positively correlated in a short period of time.