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Relationship between trading volume, stock return and return volatility: A case of Nepalese insurance companies / Niraj Acharya
Title : Relationship between trading volume, stock return and return volatility: A case of Nepalese insurance companies Material Type: printed text Authors: Niraj Acharya, Author Pagination: 129p. Size: GRP/Thesis Accompanying material: 14/B Languages : English Abstract: Insurance companies play an important role for economic development and boost economic growth by providing risk management services to the people. One of the important functions of the insurance companies is the transfer of risk from the non-risk bearers to risk-bearers. Stock prices are known to be volatile to the financial news and information. The emergence of new data makes financial specialists to change their desires and this is the primary driver for price and return changes. Trading volume and stock returns are two significant pointers of trading movement in a stock market that are together controlled by similar market elements and may contain profitable data about a security (Lo and Wang, 2001). Trading volume reflects the combined reaction of speculators to new data, while price volatility catches the effect of that data on the normal change in financial specialists' desires.
Pricing of securities depends on volatility of each asset. Therefore, price changes indicate the average reaction of investors to news. The arrival of new information makes investors to adapt their expectations and this is the main cause for price and return changes. Trading volume and volatility are indicators of the current stock market activity on one hand and a potential source of information for the future behavior of stock market on the other hand (Dimsond Marsh, 1990). Return on stock prices and trading volume are two prime indicators of trading activities in a stock market. These factors are jointly determined by the same market dynamics and may contain valuable information about a security.
This study attempts to observe the relationship between trading volume, stock return and return volatility of Nepalese insurance companies. This study is based on secondary data of 19 insurance companies of Nepal for the time period of 2013/14 to 2017/19, leading to a total of 114 observations. Data and information have been collected from annual reports of the selected companies. This study has employed descriptive research design and casual comparative research design as it deals with the relationship between trading volume, stock return and return volatility of Nepalese insurance companies.
The descriptive analysis shows that the average stock return of selected insurance companies under the study is -0.64, while the average of volatility is 59.62%. The average trading volume of selected insurance companies during the study period is noticed to be 9.48 lakh units. Likewise, past trading volume has an average of 8.17 lakh units, the average of market capitalization of selected insurance companies during the study period is found to be 1.74. Similarly, the average of BTM during the study period is noticed to be 21.48. The average firm size is 1.31 and the average turnover ratio is 18.13% of selected insurance companies.
The correlation analysis shows that past trading volume has a positive relationship with stock return. It reveals that increase in past trading volume leads to increase in stock return. Similarly, market capitalization has a positive relationship with stock return. It indicates that higher the market capitalization value, higher would be the stock return. However, past trading volume has a negative relationship with return volatility. It reveals that the higher the past trading volume ratio, lower would be the return volatility. Similarly, book to market ratio, firm size and stock return have a negative relationship with return volatility. It reveals that higher the book to market ratio, firm size and stock return, lower would be the return volatility.
The regression result shows that there is negative relationship between stock return and trading volume which reveals that higher the value of trading volume, lower would be the stock return. Likewise, there is positive relationship between market capitalization and stock return which indicates that increase in market capitalization leads to increase in stock return. Similarly, there is positive relationship between firm size and stock return. It indicates that higher the firm size; higher would be the stock return. Likewise, there is positive relationship between book value per share and stock volatility which indicates that higher the book value per share, higher would be the stock volatility. Likewise, there is positive relation between trading volume and stock volatility which shows that increase in trading volume leads to increase in stock volatility.
Relationship between trading volume, stock return and return volatility: A case of Nepalese insurance companies [printed text] / Niraj Acharya, Author . - [s.d.] . - 129p. ; GRP/Thesis + 14/B.
Languages : English
Abstract: Insurance companies play an important role for economic development and boost economic growth by providing risk management services to the people. One of the important functions of the insurance companies is the transfer of risk from the non-risk bearers to risk-bearers. Stock prices are known to be volatile to the financial news and information. The emergence of new data makes financial specialists to change their desires and this is the primary driver for price and return changes. Trading volume and stock returns are two significant pointers of trading movement in a stock market that are together controlled by similar market elements and may contain profitable data about a security (Lo and Wang, 2001). Trading volume reflects the combined reaction of speculators to new data, while price volatility catches the effect of that data on the normal change in financial specialists' desires.
Pricing of securities depends on volatility of each asset. Therefore, price changes indicate the average reaction of investors to news. The arrival of new information makes investors to adapt their expectations and this is the main cause for price and return changes. Trading volume and volatility are indicators of the current stock market activity on one hand and a potential source of information for the future behavior of stock market on the other hand (Dimsond Marsh, 1990). Return on stock prices and trading volume are two prime indicators of trading activities in a stock market. These factors are jointly determined by the same market dynamics and may contain valuable information about a security.
This study attempts to observe the relationship between trading volume, stock return and return volatility of Nepalese insurance companies. This study is based on secondary data of 19 insurance companies of Nepal for the time period of 2013/14 to 2017/19, leading to a total of 114 observations. Data and information have been collected from annual reports of the selected companies. This study has employed descriptive research design and casual comparative research design as it deals with the relationship between trading volume, stock return and return volatility of Nepalese insurance companies.
The descriptive analysis shows that the average stock return of selected insurance companies under the study is -0.64, while the average of volatility is 59.62%. The average trading volume of selected insurance companies during the study period is noticed to be 9.48 lakh units. Likewise, past trading volume has an average of 8.17 lakh units, the average of market capitalization of selected insurance companies during the study period is found to be 1.74. Similarly, the average of BTM during the study period is noticed to be 21.48. The average firm size is 1.31 and the average turnover ratio is 18.13% of selected insurance companies.
The correlation analysis shows that past trading volume has a positive relationship with stock return. It reveals that increase in past trading volume leads to increase in stock return. Similarly, market capitalization has a positive relationship with stock return. It indicates that higher the market capitalization value, higher would be the stock return. However, past trading volume has a negative relationship with return volatility. It reveals that the higher the past trading volume ratio, lower would be the return volatility. Similarly, book to market ratio, firm size and stock return have a negative relationship with return volatility. It reveals that higher the book to market ratio, firm size and stock return, lower would be the return volatility.
The regression result shows that there is negative relationship between stock return and trading volume which reveals that higher the value of trading volume, lower would be the stock return. Likewise, there is positive relationship between market capitalization and stock return which indicates that increase in market capitalization leads to increase in stock return. Similarly, there is positive relationship between firm size and stock return. It indicates that higher the firm size; higher would be the stock return. Likewise, there is positive relationship between book value per share and stock volatility which indicates that higher the book value per share, higher would be the stock volatility. Likewise, there is positive relation between trading volume and stock volatility which shows that increase in trading volume leads to increase in stock volatility.
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Barcode Call number Media type Location Section Status 659/D NIR Thesis/Dissertation Uniglobe Library Philosophy & Psychology Available