Testing for Temporal Asymmetry in the Price‐Volume Relationship

This paper presents some evidence for the presence of temporal asymmetry in the price‐volume relationship in the crude oil futures market. By using threshold models we show that there is bidirectional causality between volume and prices, whereas the conventional model that assumes symmetry can only detect unidirectional causality. The results also show that the price‐volume relationship is asymmetric, in the sense that negative price and volume changes have stronger effects (on each other) than positive changes. Some explanations for asymmetry in the price‐volume relationship are suggested.