The Asymmetric Effects of Stock Returns on Trading Volume in Tehran Stock Exchange

The relationship between returns and trading volume has interested financial economists and analysts for the last four decades. Theoretically, the effect of stock return on the trading volume is asymmetric, in the sense that, when the stock price increases, the reaction of investors is different from when the stock price is decreasing. Therefore, in this research, we empirically investigate the asymmetric effects of stock return shocks on trading volume of Tehran Stock Exchange during 2011-2016. Using the Johansson’s Co-integration technique and Wald test, the results show both positive and negative asymmetric effects of stock return on stock trade quantities. The results further show that, in the our setting, the stock return includes two different growth means of 5.4 and 11.7 which contain the integration coefficients of 0.15 and 0.07 respectively, suggesting that the high stock return rate is not the sponsor of the capital market productivity.