Ekonomski Vjesnik (Jul 2009)
Influence Of Trade Volume On Movement Of Market Index Crobex
Abstract
The phenomena on the capital market that primarily manifest through the price movements of securities are the subject of interest of economic theoreticians and direct participants in transactions respectively. The uncertainty resulting from variations in price movements induces both to try to establish their causes and factors that are influencing them. The starting basis thereat is to know the market mechanism as well as the value of elements of the trade subject, i.e. the classified securities. Since the large number of securities usually appears on the capital market and differ among themselves according to value and extent of exposing to risk, it is almost impossible to follow the position on the market through their summary value. Therefore, the market index representing the price-weighted average of the value of shares that make their component part is used as the value expression of certain market. It is, as a rule, a question of classified securities of certain representative enterprises. The starting hypothesis in this work is that the market index formed in this way is, among other things, influenced by the volume of transactions of the shares on the market. This hypothesis is checked through the case analysis of Crobex market index as well as comparative analysis of movement of this index and Dow Jones index that is being followed on one of the most developed capital markets in the world. The obtained results confirm the set hypothesis but also show that the intensity of the volume of business on the market index movement is inversely proportional to capital market depth, i. e. to the number of classified securities and participants in transactions. The cognition of this phenomenon is the basis to financial analysts in assessments of state on individual markets. What is most important, it assess of their possible future movements. Naturally, it is also the basis to the direct participants on the capital market to bring their decisions on the choice of the moment in which to enter the transaction with securities.
