Trading volume and volatility in the Boursa Kuwait

This paper presents the results of a study of the effect of daily trading volume on the persistence of timevarying conditional volatility for Kuwait Stock Exchange. The sample includes the market index, seven sectoral indices and 20 stocks. Whereas inclusion of contemporaneous volume in the equation of conditional variance does not reduce the persistence of volatility for the eight indices, this is not the case for individual companies. Furthermore, the lagged intraday volatility has higher predictive power for volatility than the lagged trading volume. These results lend further support to the mixture of distribution hypothesis at the level of firm, but not at the market and sectoral levels.