The causal relationship between stock market trading volume and GDP : evidence from Iceland

• Main Authors: Arnar Már Runólfsson 1993-, Ólöf Ragna Sigurðardóttir 1994-
• Other Authors: Háskólinn í Reykjavík
• Format: Thesis
• Language: English
• Published: 2017
• Subjects: Viðskiptafræði; Verðbréfamarkaðir; Verg landsframleiðsla; Business administration; Stock exchanges Iceland; Gross domestic product; Iceland
• Online Access: http://hdl.handle.net/1946/28183

The Icelandic economy and the Icelandic Stock Exchange have endured tremendous volatility in recent years. While the Icelandic economy has made a miraculous recovery from the financial crisis in 2008, the recovery of the Icelandic Stock Exchange has been less than ideal. These conditions have created an interesting situation for investigating the linkage between GDP and stock market development in Iceland. Previous investigations have in some instances, found evidence of a linkage between stock market development and economic growth. In spite of that, limited research has been conducted on this relationship in Iceland. This paper examines the causal relationship between Icelandic GDP and stock market trading volume in Iceland, in a sixteen-year period from 1999 to 2015. Using trading volume data from the Icelandic Stock Exchange and Icelandic GDP data, a Granger-causality test was performed in order to analyze the linkage, and the direction of causality between the variables. The findings of the statistical analysis fail to indicate the direction of the causality between changes in GDP and changes in trading volume. Keywords: Trading Volume, Gross Domestic Product, Granger-causality, Icelandic Financial Market, Icelandic Stock Exchange.