Management's Disclosure of Long-term Relationship between Return and Transaction Volume and its Impact on Stock: A Study on Stock Markets of Iraq

Abstract

The relationship between trading activity and stock returns is the subject of considerable research area in capital market literature. This study has been conducted to determine the dynamic relationship between the daily return of the ISX 100 Index and the trading volume based on 6602 observations taken from the period of 22.03.1993 to 22.03.2019 in the Iraq Stock Exchange applying Johansen cointegration analysis and VAR Analysis. The daily performance of the ISX 100 Index and the daily trading volume details were analyzed. The study has found a long-term relationship between volume and return, and a single-way causality has been achieved between volume and return. In the analysis, the relationship between the sequence, impulses, and techniques for variance decomposition was employed and the shift in index price was concluded to be efficient for the transaction volume. The impact of management’s disclosure on the relationship between stock return and its transaction volume on stock prices of Iraq's capital market collates to other stock markets in similar economies like Turkey.