Impact of trading volume on stock price volatility in the Nairobi Securities Exchange

Abstract

The study investigates the exact relationship between trading volume and the volatility of the stock price at the Nairobi Securities Exchange. It investigates how changes in trading volume relate to the changes in the movement of the stock price and the causality effect between these two variables. Using past trading data at NSE, the study will apply econometric modeling, including GARCH-X (1,1), to quantify the size of trading volume on daily price volatility. The findings are to indicate a significant relationship that reflect market dynamics and information flow. These aspects are extremely important to facilitate investors, policymakers, and market analysts in understanding market efficiency and thus proposing management of risk and stabilization of market conditions.