TRADING VOLUME AND STOCK RETURN VOLATILITY: EVIDENCE FROM SELECTED NIFTY 50 COMPANIES

Trading volume and price volatility are two of the most closely watched features of a stock market, yet the direction of the link between them is still debated. This paper examines whether trading volume and stock return volatility are related on the same day and whether either variable helps to predict the other. The sample consists of ten NIFTY 50 companies selected from ten different sectors, observed over 982 trading days from January 2022 to December 2025. Volatility is measured with the Parkinson high–low range estimator, and trading volume is measured as abnormal volume, which compares each day’s volume with the company’s average over the previous twenty trading days. The study uses Pearson correlation, ordinary least squares regression and Granger causality tests with five lags, and it checks the results in two sub-periods and with a second volatility measure. Volume and volatility are positively and significantly related on the same day for all ten companies, with correlations between 0.431 and 0.547. This relationship holds in both sub-periods and with the alternative measure. In contrast, past volume helps to predict volatility for only one company, and past volatility helps to predict volume for three companies, and none of these predictive results holds in both sub-periods. The findings support the mixture-of-distributions view that volume and volatility respond together to the same flow of information. For investors and risk managers, unusually high volume is a useful sign of higher same-day risk but not a reliable tool for forecasting future volatility.