Publication: Risk, Return and Volume in an Emerging Stock Market: The Bilbao Stock Exchange, 1916-1936
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2006-06
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Abstract
We constructed a unique data set including price and trade volumes for the Bilbao Stock Exchange (BSE) in the interwar period in order to calculate two alternative market indices (weighted and unweighted). The characteristics of the weekly returns on the market portfolio and trading volumes are analyzed in order to test the existence of various phenomena typical of emerging markets, such as autocorrelation and high persistence of volatility shocks, and other features of advanced markets, such as the risk-return relationship and the relationship between trading volumes and returns. The methodological approach is based on an augmented GARCH-cum-volume model. We find strong evidence in favour of autocorrelation and GARCH effects, no evidence of risk-return relationship, and weak evidence of a contemporaneous impact of trading volumes on returns. These findings are generally in line with the results obtained by recent studies on emerging markets.
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Workshop Financial Centres as Competing Clusters, Paris School of Economics, January 30th, 2008
Keywords
GARCH, trading volume, emerging stock market, interwar Spain