Abstract:

In this study, the interaction between return volatility, market depth and trading volume relationships are examined by using granger causality test, impulse- response functions and variance decomposition methods for the U.S. Dollars and ISE-30 Index futures contracts which are traded in TURKDEX. For the dolar futures contracts, granger causality test results shows that the direction of causality is one way and is from return to trading volume. For the ISE-30 Index contracts, the direction of causality is one way from open interest to return and there are feedback effect between the trading volume and open interest. The impulse response function results for the dolar contracts indicate that trading volume shows response in short period of time to impact in open interest and impact in return has positive effect on trading volume. For the ISE-30 Index contracts, impulse response function results reveal that any shocks on open position, return and trading volume has no effects on each other. Variance decomposition results for the dolar contracts show that both open interest and return have been explained by their own lag values, on the other hand, trading volume has been explained both its own lag values and tha values of return and open position. Variance decomposition results for the ISE-30 contracts imply that open interest, return and trading volume have been explained by their lag values. Finally, trading volume, return and open interest interactions for the U.S. Dollars and ISE-30 contracts are not the same. These results contain some conclusions about emerging markets for both academicions and practitionars

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