STOCK PRICE VOLATILITY AND TRADING VOLUME: EVIDENCE FROM SELECTED CEE FINANCIAL COMPANIES

One of the documented features of stock returns is their time-varying volatility that tends to become persistent and receives influences from daily trading volume. Our study proposes an empirical research regarding the relationship between stock prices volatility and trading volume for listed financial companies in seven CEE countries, all EU members. We use daily data of twelve selected CEE financial companies between January 2015 and December 2018 and we calculate daily stock returns. Also, we use daily trading volume of the stocks. Moreover, we estimate a Multivariate GARCH model based on the logarithmic transformation of daily stock returns and the respective trading volume and we apply Granger causality tests on the selected data in order to determine the relationship between the variables. The results show that for selected stocks from CEE countries a significant relationship between stock prices volatility and trading volume does not exist, compared to results of previous research on EU developed economies. Taking into consideration that we discover that in most situations the robustness of the models suffers from non -significant variance equation, in this region trading volume does not seem to have a predictive power for the CEE financial companies' share prices.