Price-volume relation behavior around structural breaks in Kuwait Boursa

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This study attempts to conduct a comprehensive investigation of the price-volume relation using daily stock prices of all publicly traded firms in Kuwait Boursa over the period 2005–2017. The aim is to provide evidence from an emerging market on the information arrival hypothesis, which is explained by the mixture of distribution and the sequential information arrival hypotheses. The investigation covered two main structural events; the 2008 financial crisis and the activation of Kuwait’s New Securities Law in 2010 (CMA). The GARCH-ARCH test revealed a positive contemporaneous relation between trading volume and market return, which implies that previous information shocks affect current returns and imply that Kuwait stock market is weakly efficient. When trading volume is included in the variance equation in the GARCH model, the test revealed that new information arrival is not simultaneously available to all traders and it takes time to observe, providing support to the sequential information arrival hypothesis (SAIH). Finally, there was no change in the price-volume relation around the two events and urgent assessment of the new market reform is recommended.

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    • Figure 1. Daily market return for the period from January 2005 to the end of 2017
    • Table 1. Summary statistics of the data
    • Table 2. LM test for autoregressive conditional heteroskedasticity (ARCH) effect
    • Table 3. GARCH (1,1) of volume, return, volatility relationship
    • Table 4. GARCH (1,1) of volume, return, volatility relationship with volume included in the variance
    • Table 5. GARCH (1,1) of volume, return, volatility relationship pre and post CMA law
    • Table 6. GARCH (1,1) of volume, return relation in pre-post CMA law, volume included in variance equation
    • Table 7. GARCH (1,1) of volume, return and volatility relationship in pre-post financial crisis