The rate of information flow into the market in generating market volatility has

been a much debated issue in the finance research. Moreover, since the rate of

information cannot be directly observable and quantifiable, trading volume has

been considered to be a good proxy for incorporating such information. The main

purpose in this research is to investigate the dynamics and causal relationship

between stock market volatility and trading volume in Indonesian stock market

from period February 2013 to February 2018. This research using EGARCH and

Granger Causality model test as analysis tool. EGARCH and Granger causality

model are employed to analyze the volume-volatility relationship.

The analysis indicates that the Indonesian stock market exhibits volatility

asymmetry implying that the return volatility responds more to the bad news than

to the good news. The analysis also uncover that the movement of trading volume

is useful information to predict future return in Indonesian stock market.

Furthermore, the result of Granger Causality test shows that there is bidirectional

(causality) relationship between trading volume and stock return in Indonesian

stock market.