This paper studies the informational role of trading volume using common stocks categorized by investor group in Korean stock market from January 2004 to December 2006. The
GARCH(1,1) model fits Korean stock market well and the volume variables ( such as absolute value of the net buy volume, excess buy volume and excess sell volume) have additional explanatory effect when they are included in the variance equation of the GARCH(1,1) model.
This paper further test whether the effects of excess sell volume and excess buy volume on volatility is asymmetric. In addition, the effects of volume on volatility are shown to be different by investor groups. Because of the information disadvantage, the daily return volatility is highly correlated with the volume of domestic individual investors and non-listed foreign investors. Finally, I extend this result to an expanded data set that includes 477 common stocks.