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Stand. Glob J. Bus. Manag

Vol. 1 No. 4

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Standard Global Journal of Business Management (SGJBM)
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Standard Global Journal of Business Management Vol.1(4), pp. 074 - 083, July 2014
Copyright 2014 Standard Global Journals

Research article

Stock returns - volume relationship in the Nigerian financial market

*Ezugwu CI and Negedu Emmanuel

Department of Accounting, Faculty of Management Sciences, Kogi State University, Anyigba

*Corresponding Author E-mail: ,

Accepted 11 July, 2014


This study determines the relationship between stock returns and trading volume, using daily data of some Nigerian Banking Sector Stocks. It further checked for both the contemporaneous and causal relationship between stock return and trading volume utilizing data covering ten (10) companies from the Banking Sector. Six hundred and nineteen to seven hundred and six (619-706) observations for a period of thirty six months (36) from 1st June, 2009 to 31st May 2012, were empirically tested with the Granger-Causality tests. This determined if the Wall Street adage which says, ?It takes volume to make prices? was true in the Nigerian Banking Sector. Using the daily data, we first found a negative relation between and absolute value of price changes (return) and price changes itself in the Nigerian Banking Stocks. However, the results from the Granger-Causality test failed to find strong evidence on stock price changes leading volume. This was contrary to evidence reported by study on developed markets but consistent with previous result from the Latin American Market which is an emerging market like that of Nigeria. In fact, in all the ten banks studied, volume seems to lead stock price changes. Thus, we concluded that these set of emerging markets with different institutions and information flows than the developed markets, do not present similar stock/return-volume relationship to the preponderance of studies employed US data. The implication of these results was that differences in institutions and information flows in the set of emerging markets are important enough to affect the valuation process of equity securities and warrant further analysis.

Keywords: Stock Returns, Trading Volume, Capital Market, Nigerian Banking Sector, Stock Relationship and Stock Price

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