Studies in Economics and Finance

Trading volume and return relationship in the crude oil futures markets
Saada Abba Abdullahi Reza Kouhy Zahid Muhammad
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SEF
31,4
Trading volume and return
relationship in the crude oil
futures markets
426 Saada Abba Abdullahi, Reza Kouhy and Zahid Muhammad
Dundee Business School, University of Abertay Dundee, Dundee, UK

Abstract
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Purpose The purpose of this paper is to examine the relationship between trading volume and
returns in the West Texas Intermediate (WTI) and Brent crude oil futures markets. In so doing, the
paper addresses two important issues. First, whether there is a positive relationship between returns
and trading volume in the crude oil futures markets. Second, whether information regarding trading
volume contributes to forecasting the magnitude of return in the markets, an important issue because
the ability of trading volume to predict returns imply market inefficiency.
Design/methodology/approach The paper used daily closing futures price and their
corresponding trading volumes for WTI and Brent crude oil markets during the sample period January
2008 to May 2011. Both the log volume and the unexpected component of the detrended volume are used
in the analysis in other to have robust alternative conclusion. The generalized method of moments
(GMM) approach is used to examine the contemporaneous relationship between returns and trading
volume while the Granger causality approach, impulse response and variance decomposition analysis
are used to investigate the ability of trading volume to predict returns in the oil futures markets.
Findings The results reject the postulation of a positive relationship between trading volume and
returns, suggesting that trading volume and returns are not driven by the same information flow which
contradicts the mixture of distribution hypothesis in all markets. The results also show that neither
trading volume nor returns have the power to predict the other and therefore contradicting the
sequential arrival hypothesis and noise trader model in all markets. Finally, the findings support the
weak form efficient market hypothesis in the crude oil futures markets.
Originality/value The findings has important implications to market regulators because daily
price movement and trading volume do not respond to the same information flow and therefore the
measures that control price volatility should not focused more on volume; otherwise they may not
provide fruitful outcomes. Additionally, traders and investors who participate in oil futures should
not base their decisions on past trading volume because it will lead to profit loss. The results also
have implications for market efficiency as past information cannot assist speculators to forecast
returns in all the oil markets. Finally, investors can benefit from portfolio diversification across the
two markets.
Keywords GMM, Granger causality, Oil futures return, Trading volume
Paper type Research paper

Studies in Economics and Finance
Vol. 31 No. 4, 2014
pp. 426-438
Emerald Group Publishing Limited
1086-7376
DOI 10.1108/SEF-08-2012-0092
1. Introduction
The relationship between oil price changes (returns) and trading volume has important
implications for hedgers, speculators and policymakers. First, the pricevolume
relationship can provide information about market structures (Karpoff, 1987). Second,
The first author acknowledges financial support from the Petroleum Technology Development
Fund (PTDF) Nigeria. The authors also acknowledge comments from two anonymous reviewers.
 the same relationship suggests whether technical or fundamental analysis should be Trading volume
used in developing trading strategies (Moosa and Silvapulle, 2000), and third,
determines the success or otherwise of futures contracts (Bhar and Hamori, 2004).
and return
Fourth, it can help to explain the informational efficiency of the futures market because relationship
the ability of trading volume to forecast futures price changes implies market
inefficiency (Lau and Go, 2012; Kocagil and Shachmurove, 1998; Foster, 1995). Finally,
the relationship provides information on futures market conditions (Fujihara and 427
Mougoue, 1997; Bhar and Hamori, 2005).
Most research on the price change and trading volume relationship is concerned with
three important theories. First is the mixture of distribution hypothesis (MDH), which
postulates a positive relationship between price changes and trading volume (see
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Karpoff, 1987; Clark, 1973; Epps and Epps, 1976; Tauchen and Pitts, 1983; Harris, 1986).
Second is the sequential arrival of information hypothesis, which suggests that past
values of prices and volume can predict each other because market participants respond
to new information sequentially (see Copeland, 1976; Jennings et al., 1981). Lastly, the
noise trader model suggests that noise traders behavior of using past information about
price changes to make investment decisions causes a positive causal relationship
between trading volume and price changes in either direction (see De Long et al., 1990).
However, there are still conflicting views on which theory is to be supported in the
commodity market.
A large body of literature has explored the relationship between price change and
trading volume in the crude oil markets, with different findings. However, available
evidence has focused mainly on the West Texas Intermediate (WTI) oil futures market.
Given the fact that the oil futures contract is among the worlds most actively traded
commodities and has had large price fluctuations in recent years, it is important to
increase knowledge on the relationship between oil return and trading volume. This
paper contributes to the literature by examining the trading volume and return
relationship in the WTI and Brent crude oil futures markets, using the generalized
method of moments (GMM) and Granger causality approaches. To my knowledge, aside
from Foster (1995), there is no study that investigates the forecast ability of trading
volume to price changes in the Brent market. The findings of this paper are important,
given that market participants need alternatives for risk diversification, and regulators
need to know the effectiveness or otherwise of their policies on the international oil
market. Second, in contrast to previous studies, the relationship was investigated using
two specifications of trading volume, log volume and unexpected volume component of
the detrended series, to produce a robust alternative conclusion. Finally, it provides new
evidence on the relationship between trading volume and returns, using data that covers
the recent period of high turmoil in oil prices.
This paper addresses two important issues. First, whether there is a positive
relationship between price change and trading volume in the crude oil futures markets.
Second, whether trading volume contains information that can be used to forecast future
price change. The rest of the paper is organized as follows. Section 2 provides a brief
discussion on the previous studies on the price change and trading volume relationship
in the crude oil markets. Section 3 describes the data used in this paper. Section 4
presents the methodology and empirical results, and Section 5 concludes the findings of
the paper.
 SEF 2. Literature review
Among the studies that have addressed the issue of the price change and trading volume
31,4 relationship in the crude oil futures markets is that of Foster, 1995. The author applied
the generalized autoregressive conditional heteroscedastic (GARCH) and GMM to
examine the price change and trading volume relationship in the WTI and Brent crude
oil futures markets. Using daily data, the author found a positive relationship between
428 price variability and trading volume, supporting the mixture of distribution hypothesis.
He also observed that past trading volume can predict price changes in both markets.
According to the authors, this finding does not provide support for the sequential arrival
hypothesis, nor does it contradict the mixture of distribution hypothesis; rather, it
results from pricing inefficiency. Fujihara and Mougoue (1997) also investigated the
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price variability and trading volume relationship in the petroleum futures market for
unleaded gasoline, heating oil and crude oil traded at the New York Mercantile
Exchange, using the linear and non-linear Granger causality tests. In the WTI market,
the linear causality test shows that lagged trading volume does not cause price changes,
while the non-linear causality test indicates bi-directional causality between the
variables, which led the author to conclude market inefficiency. Extending previous
studies, Kocagil and Shachmurove (1998) examined the contemporaneous and
inter-temporal causality between trading volume and price change in the WTI market,
using both rate of return and absolute return as a proxy to price changes. By applying
the vector autoregressive (VAR) approach, they found a positive correlation between
absolute return and trading volume, but not between rate of return and trading volume.
Their results also indicate bi-directional causality between absolute return and trading
volume, while the inter-temporal causality test shows that lagged return does not cause
trading volume. Moosa and Silvapulle (2000) also examined the pricevolume
relationship in the WTI crude oil futures market using linear and non-linear causality
tests, and daily data for three- and six-month contracts to maturity. In contrast to the
results of Fujihara and Mougoue (1997), they found that the linear causality test shows
no causality from trading volume to price changes, except in the second sample period,
while the non-linear causality test confirmed bi-directional causality between trading
volume and price change, thereby supporting the sequential arrival of information
hypothesis.
Moosa et al. (2003), continuing the research in this field, investigated the temporal
asymmetry causality between returns and trading volume in the WTI market. By
applying the Granger causality test to daily trading volume and futures prices at
three- and six-month contracts, the results of the symmetric model show that futures
price leads trading volume. On the other hand, the asymmetric model indicates
bi-directional causality between trading volume and price changes. Furthermore,
Bhar and Hamori (2005) applied the AR-GARCH model to examine the returns
volume relationship in the WTI futures market. They found that trading volume
does not cause price changes, while returns lead trading volume with a lag of 15 and
9 days, which, according to the authors, provides mild evidence in support of noise
trading activities. In sum, it can be seen that most of the available studies explaining
this relationship have concentrated on the WTI oil futures market. They also used
either the Granger causality test or the generalized autoregressive conditional
heteroskedasticity models.
 3. Data and its properties Trading volume
The data used in this paper consist of daily closing futures prices and their
corresponding trading volumes for the WTI and Brent crude oil markets. The study
and return
uses data from January 3, 2008, to May 5, 2011, a period characterized by extreme oil relationship
price volatility. The sample used covers two important events that have influenced the
recent fluctuation in oil price. First, the period during which oil price reached its highest
level of US$145 per barrel in 2008, and second, the period of political instability and 429
unrest in Arab countries in 2011. Data for WTI futures prices was sourced from the
Energy Information Administration, USA, whilst Brent futures prices and the trading
volumes were obtained from DataStream International. The two crude oil markets were
selected because, in terms of oil commodities, these contracts have the worlds largest
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trading volumes and active futures markets. The price series is converted into log
returns, calculated as rt log (pt /pt1 ) 100, where rt is the futures return, pt is the
current futures price and pt1 is lagged futures price for one period, as in Ciner (2002) and
Mougou and Aggarwal (2011).
Following Bessembinder and Seguin (1992), trading volume is detrended to remove
any secular growth by deducting the 100-day moving average from the original series.
Unit root tests are then conducted on the transformed volume to find out whether it
forms a stationary series. As in Bessembinder and Seguin (1992), the detrended trading
volume series is divided into expected and unexpected components using
autoregressive integrated moving average (ARIMA) (4, 0, 2) in the WTI market and
ARIMA (1, 0, 4) for the Brent market. The unexpected component represents the daily
volume shock, whilst the expected component is the daily volume shock, which is highly
variable but forecastable across a number of days. The analysis is then carried out using
both the log volume and the unexpected log volume series.
Table I reports the summary statistics for the daily oil futures returns and trading
volumes. The results show that the sample mean is higher for the trading volume than
for rate of returns, whilst the standard deviation is greater for returns in both the WTI
and Brent markets. All the variables are negatively skewed, except the WTI-return,
implying that they are characterized by a fatter tail than the normal distribution, and
kurtosis is greater than 3, indicating that they are leptokurtic. The JarqueBera test
indicates that the trading volume and returns series reject the normality hypothesis in
all of the markets. The results of the augmented DickeyFuller (ADF) test indicate that
the oil futures returns, log volume and detrended volume series (see Table I, Appendix)

Standard JarqueBera
Variables Mean deviation Skewness Kurtosis probability ADF KPSS

WTI-returns 0.0009 3.1123 0.2211 6.9558 547.94 (0.0) 30.51* 0.101*

WTI-volume 12.090 0.3319 0.7678 6.4071 483.01 (0.0) 7.779* 0.248*
Brent-returns 0.0153 2.7532 0.0818 5.9025 292.27 (0.0) 31.08* 0.104*
Brent-volume 12.568 0.3988 1.6983 11.985 3,190.1 (0.0) 13.52* 0.248*

Notes: * Denotes significance at the 5% level; figures in bracket are the probabilities for the normality Table I.
test which indicate that the returns and volume for all markets is not normally distributed; the results Descriptive statistics for
of the ADF and KPSS test indicate that the returns and volume are stationary at the 5% level in the WTI crude oil returns and
and Brent oil futures markets trading volume
 SEF reject the null of a unit root at the 5 per cent level, implying that they are stationary.
These results are also confirmed by the KwiatkowskiPhillipsSchmidtShin (KPSS)
31,4 test in all markets.

4. Methodology and empirical results

4.1 Generalized method of moments
430 The GMM is a simultaneous regression approach used in time series analysis that is
robust to heteroskedasticity and autocorrelation in the residuals. This approach is
efficient, consistent and asymptotically normal compared to other standard estimators
because it does not account for any information aside from that in the moment
conditions (Hansen, 1982). It also deals with the problem of simultaneity bias in the
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modeling returns and trading volume relationship (Foster, 1995; Lee and Rui, 2002;
Mougou and Aggarwal, 2011). Following Foster (1995), Ciner (2002) and Floros and
Vougas (2007), this paper has used the lagged values of trading volume and returns as
an instrumental variable estimator. The model can be estimated using the following
structural equation:

Rt 0 1Vt 2 R R,t

Vt b0 b1 Rt b2V V,t (1)

where Rt and Vt represent returns and trading volume, respectively. The relationship
between trading volume and returns can be determined by the significance of the
coefficients 1 and b1 in equation (1). Both 1 and b1 are significant if trading volume and
returns are related. The J-statistics can also be used to test the validity of the model,
whether it is properly identified or over-identified (Hansen, 1982).
Table II reports the estimated results of the GMM using the log volume. The results
show that the value of the coefficients 1 and b1 are 0.094 and 0.014, respectively; in the
WTI market, they are all insignificant. Likewise, in the Brent market, the estimated
values are 0.007 and 0.095, respectively, and are also insignificant. These results

Coefficients WTI Brent

0 1.134 (0.133) 0.065 (0.016)

1 0.094 (0.132) 0.007 (0.014)
2 0.066 (1.535) 0.083 (2.249)*
J-statistics 7.41E42* 3.68E42*
0 4.702 (8.846)* 5.654 (7.349)*
1 0.014 (0.316) 0.095 (1.040)
2 0.611 (13.91)* 0.550 (8.981)*
J-statistics 0.000* 3.79E40*

Notes: * Denotes significance at the 5% level; T-statistics are shown in parentheses beside the
Table II. coefficient estimate; the results show that the value of the coefficients 1 and 1 are insignificant in
Estimated results of the the WTI and Brent markets, implying that there is no relationship between returns and trading volume;
generalized method of the J-statistic cannot reject the null hypothesis at the 5% level which suggests that the data fits the
moments model in all markets
 suggest that there is an insignificant relationship between trading volume and returns, Trading volume
meaning that they are not endogenously determined in all markets and their changes are
driven by different information. The J-statistics also cannot reject the null hypothesis at
and return
the 5 per cent level, suggesting that the data fits the model in both markets. The results relationship
contrast the MDH, indicating no positive correlation between trading volume and
returns in all of the markets.
To enhance the validity of the results, the analysis is repeated using the unexpected 431
volume component of the detrended series, and the results were consistent in all markets
(see Table III, Appendix). The estimates of 1 and b1 are 4.587 and 0.005 in the WTI,
and 404.9 and 0.061 in the Brent market, respectively. Apart from being
insignificant, the estimates of returns and unexpected trading volume are negative, thus
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rejecting the MDH. Another important finding is that both the log volume and
unexpected volume show the same relationship, with price changes in all of the markets.

4.2 Linear granger causality test

The Granger (1969) causality test is used to determine whether trading volume or
returns can improve the forecast performance of each other. The model can be described
as follows:

n m
Rt 1 V
i1
i t1 R
j1
j tj e1t (2a)

n m
Vt 2 i Rt1
i1
V
j1
j tj e2t (2b)

where, Rt represents futures return at time t, and Vt represents trading volume at time t.
The Granger approach tests the hypothesis H0: i 0 that Vt does not linear Granger
cause Rt. Likewise, H0: i 0 that Rt does not linear Granger cause Vt. Therefore, when
lagged values of Vt are significant in explaining Rt, Vt Granger-cause Rt and there exists
unidirectional causality from trading volume to returns. When lagged values of Rt are
significant in explaining Vt, there is unidirectional causality from returns to trading
volume. Finally, when the lagged values of trading volume and returns are significant in
each others equation, there is bi-directional causality, while the insignificance of the
variables in explaining each other implies that they are independent. The standard joint

Null Hypothesis Ho F-statistics p-values

WTI-volume does not cause WTI-returns 0.031* 0.861

WTI-returns does not cause WTI-volume 0.092** 0.761
Brent-volume does not cause Brent-returns 7.325** 0.120
Brent-returns does not cause Brent-volume 4.383** 0.357

Notes: * and ** Denotes insignificance at 1% and 5% levels; the F-statistics and p-values are shown
in parenthesis; the results indicate that the null hypothesis that trading volume and returns does not Table III.
Granger cause the other cannot be rejected at the 1% level in the WTI and Brent markets, implying Estimated results of the
that there is no causality between them in either direction Granger causality test
 SEF F-test is used to examine the Granger causality in a VAR system (see Brooks, 2008;
Enders, 1995; Asteriou and Hall, 2007).
31,4 The results of the Granger causality test using log volume are reported in Table III.
Because the trading volume and returns series are stationary I(0) in all of the markets, an
unrestricted VAR in levels is then estimated. The optimal lag lengths of the VAR are
selected by Akaike information criterion. The results for the WTI market indicate that
432 the null hypothesis that trading volume and returns does not Granger cause the other
cannot be rejected at the 1 per cent level, implying that there is no causality between
them in either direction. In the Brent market, the estimated result is identical to that of
the WTI market because the null hypothesis that trading volume and returns does not
Granger cause the other cannot be rejected at the 1 per cent significance level. The
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findings suggest that lagged trading volume does not contain any important
information that will be helpful in predicting returns, thereby supporting Clarks (1973)
mixture of distribution and consistent with Bhar and Hamori (2005) who studied the
WTI market. However, it contrasts the sequential arrival hypothesis not in line with the
findings of Fujihara and Mougoue (1997), Kocagil and Shachmurove (1998) and Moosa
and Silvapulle (2000) in the WTI market. Furthermore, the results provide evidence that
supports the market efficient hypothesis because speculators and rational investors
cannot use information about trading volume to forecast returns. It also reject the noise
trader model in all of the crude oil markets, contradicting Bhar and Hamori (2005), who
found mild evidence of noise trading activity in the WTI market.
As an additional check to verify whether the lack of causality between trading
volume and returns was due to the improper treatment of volume, we run the analysis
again using the unexpected component of the detrended volume series. Similarly, the
results show no evidence of causality between returns and unexpected volume of all
markets in any direction (see Table III, Appendix). The findings therefore confirm that
trading volume cannot predict returns in all cases.

4.3 Impulse response function and variance decomposition analysis

The impulse response function is applied to trace the responses of trading volume and
returns on each other to understand the impact of shocks on the variables, as well as its
size and direction. The impulse response of returns and trading volume can be written as
follows:

Rt
i0
11i Rti
i0
12i R (3a)

Vt 21i vti
i0

i0
22i v (3b)

The coefficient i can be used to produce the effect of Rt and vt on the whole time paths
of the variables Rt and Vt. The elements 11(1) and 12(1) are the responses of unit
changes in Rti and vti on Rt over a period (Enders, 1995). The variance decomposition
in equation (4) is then used to give the proportion of movement in trading volume or
returns that is caused by their own shock and shocks on others (see Sims, 1980). The
variance decomposition can be calculated from equation (3) as follows:
 2 R2 [( 11(0)2 11(1)2 ....... 11(n 1)2 ] Trading volume
(4)
v2 [( 12(0)2 12(1)2 ....... 12(n 1)2 ] and return
where Rt is exogenous in the VAR system when a shock on vt cannot explain its forecast
relationship
error variance (see Enders, 1995; Lutkepohl, 2004). Following Pisedtasalasai (2009) and
Lee and Rui (2002), the present study used the impulse response and variance
decomposition to investigate the return and trading volume relationship in the oil 433
futures market.
Figures A1 and A2 illustrate the estimated results of the impulse response function
analyses for the WTI and Brent returns, and their log trading volume, respectively:
Figure A1 for the WTI market indicates the insignificant impact of shock in trading
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volume and returns on each other. The results reported in Figure A2 also indicate that
neither shock on trading volume nor returns is significant in explaining changes on the
other in the Brent market. These results also suggest that past information about
trading volume cannot be useful in predicting returns in either market, but that the
shock on their trading volume and returns is important in explaining movement within
themselves. The results of the generalized forecast error variance decomposition for the
crude oil futures markets over the period of 1, 5 and 10 years are reported in Table IV. In
panel A for the WTI market, the results indicate the negligible impact of trading volume
on crude oil futures returns from the first year to the tenth year, implying that volume
does not make a significant contribution to the forecast variance of return. Likewise, the
result in panel B for the Brent market shows that trading volume does not contribute to
explaining movement in returns. Yet, conversely, the results in panels A and B show
that both returns and trading volume are explained by movement in their own shocks.
The analysis is further conducted using the unexpected component of the detrended
trading volume series. The results of the impulse response are consistent with the
previous findings, indicating an insignificant response of the unexpected volume to
shock in returns and that of returns on volume in all markets (see Figures A1 and A2,
Appendix). For the variance decomposition analysis, the results suggest that the

Dependent variable WTI-volume

Lag Standard error Volume Returns Lag Standard error Volume Returns

Panel A: dependent variable WTI-returns

1 3.1108 0.0000 100.00 1 0.2637 99.858 0.1418
5 3.1177 0.0034 99.997 5 0.3318 99.807 0.1984
10 3.1177 0.0034 99.997 10 0.3330 99.801 0.1981
Dependent variable Brent-volume
Panel B: dependent variable Brent-returns
1 2.7442 0.0000 100.00 1 0.3273 99.857 0.1430
5 2.7709 0.9047 99.095 5 0.3862 99.532 0.4682
10 2.7712 0.9271 99.072 10 0.3998 99.467 0.5327

Notes: This table reports the results of the variance decomposition analysis over the period of a 1-, 5 Table IV.
and 10-year period; the results indicate that neither returns nor trading volume make a significant Estimated results of the
contribution to the forecast variance of the other, but explained movement in their own shocks in the variance decomposition
WTI and Brent market over the 10-year period analysis
 SEF movement of returns is not explained by trading volume in these markets up to the
10-year period (see Table IV, Appendix). The empirical results show that trading
31,4 volume has an insignificant contribution in forecasting returns, and again confirm that
there is no causal relationship between returns and volume in all markets. Overall, the
findings reject the sequential arrival hypothesis and noise trader model, but support
weak form efficiency in the crude oil markets.
434
5. Conclusion
This paper investigates the relationship between daily trading volume and returns in
the WTI and Brent crude oil futures markets. The analysis is conducted using the log
trading volume and the unexpected component of the detrended trading volume series,
following Bessembinder and Seguin (1992). The empirical results using the GMM model
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indicate no positive contemporaneous relationship between returns and volume

(unexpected or log volume) in all markets, which contrast the MDH. The results of the
Granger causality test also show no causal relationship between volume and return in
either direction, rejecting the sequential arrival hypothesis and the noise trader model.
The findings are also confirmed by the impulse response and variance decomposition
analysis because neither shock on volume nor its forecast error variances has the power
to predict returns in all markets. The implications of these results are that energy
policymakers should know that daily price movement and trading volume do not
respond to the same information flow. Therefore, the idea of regulating trading volume
to control oil price volatility may not provide fruitful outcomes. Also, traders and
investors who participate in oil futures should not base their decisions on past trading
volume because this will lead to profit loss; the results also have implications for market
efficiency, as past information cannot assist speculators in forecasting futures returns in
all of the markets. Finally, investors can benefit from portfolio diversification across the
two oil markets. It is recommended that future research could use open interest as an
explanatory variable, given that petroleum futures appear to have a large number of
hedging participants who trade infrequently; thus, the use of open interest could also be
revealing.

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Appendix
436

Standard JarqueBera
Variables Mean deviation Skewness Kurtosis probability ADF KPSS
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WTI-volume 0.009 0.328 0.781 5.944 340.4 (0.0) 7.487a 0.158a

Brent-volume 0.031 0.367 2.747 17.66 7,476. (0.0) 12.67a 0.184a

Table AI. Notes: a Denotes significance at the 5% level; figures in bracket are the probabilities for the normality
Descriptive statistics for test which indicates that the unexpected trading volume for all markets is not normally distributed; the
crude oil unexpected results of the ADF and KPSS test indicate that the unexpected volume is stationary at the 5% level in
trading volume the WTI and Brent oil futures markets

Coefficients WTI BRENT

0 0.000 (0.032) 0.069 (0.010)

1 0.005 (0.111) 404.9 (0.011)
2 0.019 (0.425) 2.183 (0.011)
J-statistics 0.000* 0.000*
0 0.036 (0.298) 0.002 (0.113)
1 4.587 (0.175) 0.061 (0.771)
2 0.067 (1.407) 0.017 (0.242)
J-statistics 7.01E-46* 0.000*

Table AII. Notes: * Denotes significance at the 5% level; T-statistics are shown in parentheses beside the
Estimated results of the coefficient estimate; the results indicate that the coefficients 1 and 1 are insignificant, implying no
generalized method of relationship between returns and unexpected trading volume in the WTI and Brent markets; the
moments using J-statistic cannot reject the null hypothesis at the 5% level which suggests that the data fits the model
unexpected volume in all markets

Null hypothesis Ho F-statistics p-values

WTI-volume does not cause WTI-returns 0.830* 0.660

WTI-returns does not cause WTI-volume 0.206* 0.902
Brent-volume does not cause Brent-returns 2.505* 0.286
Brent-returns does not cause Brent-volume 2.227* 0.328

Table AIII. Notes: * and ** Denotes insignificance at 1% and 5% levels; the F-statistics and p-values are shown
Estimated results of the in parenthesis; the results indicate that the null hypothesis that returns and unexpected volume does
Granger causality test not Granger cause the other cannot be rejected in the WTI and Brent markets, implying no causality
using unexpected volume between them in either direction
 Dependent variable WTI-volume
Trading volume
Lag Standard error Volume Returns Lag Standard error Volume Returns and return
Panel A: dependent variable WTI-returns relationship
1 3.2317 0.0000 100.00 1 0.2467 99.926 0.0735
5 3.2472 0.0034 99.886 5 0.2461 99.902 0.0982
10 3.2473 0.1137 99.887 10 0.2461 99.902 0.0982
Dependent variable Brent-volume
437
Panel B: dependent variable Brent-returns
1 2.8393 0.0000 100.00 1 0.3188 99.853 0.1467
5 2.8569 0.3709 99.629 5 0.3193 99.546 0.4540
10 2.8569 0.3709 99.629 10 0.3193 99.546 Table AIV.
0.4540
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Estimated results of the

Notes: This table reports results of the variance decomposition analysis over the of 1-, 5- and 10-year variance decomposition
period; the results indicate insignificant contribution of unexpected volume and returns to the forecast analysis using unexpected
variance of each other but explained movement in their own shocks in the WTI and Brent market volume

Response to Cholesky One S.D. Innovations 2 S.E.

Response of WTI-returns to WTI-returns Response of WTI-returns to WTI-volume
4 4

3 3

2 2

1 1

0 0

1 1
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10

Response of WTI-volume to WTI-returns Response of WTI-volume to WTI-volume

0.3 0.3

0.2 0.2

0.1 0.1

0.0 0.0
Figure AI.
Impulse response function
for the WTI returns and
0.1 0.1
trading volume
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
 SEF Response to Cholesky One S.D. Innovations 2 S.E.

31,4 Response of Brent-returns to Brent-returns Response of Brent-returns to Brent-volume

3 3

2 2
438
1 1
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0 0

1 1
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10

Response of Brent-volume to Brent-returns Response of Brent-volume to Brent-volume

0.4 0.4

0.3 0.3

0.2 0.2

0.1 0.1

Figure AII. 0.0

0.0
Impulse response function
for the Brent returns and
trading volume 0.1 0.1
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10

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1. http://orcid.org/0000-0001-5625-8877 KumarSatish Satish Kumar satishwar1985@gmail.com ICFAI

Foundation for Higher Education, IBS Hyderabad, Hyderabad, India . 2017. Revisiting the price-
volume relationship: a cross-currency evidence. International Journal of Managerial Finance 13:1, 91-104.
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