This study empirically examines the relationship between equity market volatility and trading volume using equity market indices of four emerging economies, such as, Brazil, Russia, India and China (BRIC) over the period from 2008 to 2013. Using daily data of their respective stock market indices, we estimate an exponential generalized autoregressive conditional heteroscedasticity (EGARCH) model to confirm the volatility asymmetry, and then we examine the volume–volatility relationship by augmenting contemporaneous and lagged trading volume in the EGARCH model. The results indicate substantial volatility asymmetry across the BRIC equity markets. We find that contemporaneous trading volumes are significantly associated with equity market volatility for all the four markets studied, supporting the mixture of distribution hypothesis. Lagged trading volumes are found to be insignificant in explaining conditional volatility. However, it is evident that trading volume fails to attenuate the degree of volatility persistence. The persistence level remains high across the BRIC markets even after incorporating trading volumes in the volatility model.
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