This study reviews previous research on the relation between price changes and trading volume in financial market, and empirically tests the relationship in the Korean stock market.
For this test, daily market returns and trading volumes are selected from January 1990 to November 1995. As for the research methodology, the Pearson correlation coefficient, Wilcoxon rank sum test are employed.
The findings of this empirical study are as follows ;
First, there exists positive correlation between the absolute price change and trading volume.
Second, the ratio of transaction volume to price change is greater for transactions on which price rises than for those on which price falls. Third, there are no consistent correlations between the price change pre se and trading volume.
