Testing for growth of selected companies from sensex of BSE through relationship between trading volume and stock returns in India

The linkage between stock prices and trading volume has been subjected to extensive research worldwide. The issue is also gaining importance to India especially in post liberalisation period. In this context this article attempts to empirically examine the growth of relationship between stock returns and trading volume in India using monthly data time series over a nine year period from January 2002 to December 2010 for twelve Indian stocks. The study employed the three steps in the first step descriptive study, in the second step augmented dickey-fuller unit root test for checking stationery and in the third step granger causality tests for testing the causality between stock return and trading volume. Granger causality test find that there is low degree causality between stock return and trading volume in Indian stock market because out of twelve stocks, three stocks indicate that return cause volume and the remaining nine stocks shows no causation at all.