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This paper examines the trading volume and return and volatility relationship on the Stock Exchange of Mauritius (SEM). Thirty-six stocks, six constructed indices and the SEMDEX has been used to test the validity of the Mixture of Distributions Hypothesis where volume is taken as a proxy for the rate of informal arrival. To achieve the objectives several versions of the Autoregressive Conditional Heteroscedasticity (hereafter ARCH) family is adopted namely the simple ARCH model, GARCH and GJR-TGARCH. Analysis has also been done to include a risk component in the models by using ARCH-in-mean models.
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