Testing for Temporal Asymmetry in the Price-Volume Relationship

This paper presents some evidence for the presence of asymmetry in the price-volume relationship in the crude oil futures market. The data sample includes threeand six-month contracts and covers the period between 2 January 1985 and 11 July 1996. Using threshold models we show that the price changes have systematic asymmetric effects on volume changes in that negative price changes have stronger effects than positive changes. On the other hand, there is no evidence of positive volume changes having any effects on the price changes while there is strong evidence of significant effects of negative volume changes. The results appear to depend on maturity and sample periods used. The findings have implications for, among others, market efficiency and trading strategy.