Price–volume relationship in Borsa Istanbul: Frequency domain causality analysis

The aim of this study is to investigate the causality relationship between the index prices and trading volumes of BIST 100, BIST Industrial, BIST Financial, and BIST 30 using daily frequency data for the period from January 2, 2017, to December 31, 2021, by employing the frequency domain causality test relationship from stock prices to trading volume at the 1% and 5% statistical significance levels in the long and medium term. Using the RALS-LM unit root tests developed by Meng et al. (2014) and Meng, Lee, and Payne (2017), the possible causal relationship between the series that were found to be non-stationary at their levels was examined with the frequency domain causality test of Breitung and Candelon (2006). In this study, logarithmic transformation was applied to the time series variables in order to minimize potential problems that may arise from the dynamic structure of the data set and to obtain more reliable results by increasing the stability of the analytical model. However, no causal relationship was found from trading volume to stock prices in the long and medium term. Nevertheless, there is a causal relationship from trading volume to stock prices in the short term. According to the analysis conducted, the existence of weak form efficient market hypotheses in all indices was determined.