Stock Prices and Volume

A. Ronald Gallant, Peter E. Rossi, and George E. Tauchen
The Review of Financial Studies, Vol. 5, No. 2, pp. 199-242.


We undertake a comprehensive investigation of price and volume co- movements using daily New York Stock Exchange data from 1928 to 1987. We adjust the data to take into account well-known calendar effects and long-run trends. To describe the process, we use a seminonparametric estimate of the joint density of current price change and volume conditional on past price changes and volume. Four empirical regularities are found: (i) positive correlation between conditional volatility and volume; (ii) large price movements are followed by high volume; (iii) conditioning on lagged volume substantially attenuates the "leverage" effect; and (iv) after conditioning on lagged volume, there is a positive risk-return relation.