Chicken-Egg Dilemma for the Relationship Between Price and Volume in Borsa Istanbul

Abstract

This chapter empirically examines the relationship between stock prices and stock volumes for Borsa Istanbul, the only stock exchange in Turkey. The price-volume debate has been a common focus in the literature as the chicken-egg dilemma probably since the financial markets started to operate in a competitive manner. This chapter employs Borsa Istanbul and also considers the sector indices of the market. The authors employ frequency domain causality analysis of Breitung and Candelon and wavelet coherence analysis of Grinsted et al. with comparisons of the results for each sector. The findings show that (1) it is hard to argue for the existence of a distinct pattern in an emerging stock market like Borsa Istanbul; (2) there are several periods that propose challenges like the increasing foreign share, foreign shocks transmitted to the domestic market, and local effects; and (3) speculation is an inherit part of stock markets; and it is not possible to get rid of but rather act timely to minimize the adverse consequences and to deter market-wide repercussions.