Stock Prices and Volume A.Ronald Gallant North Carolina State University Peter E.Rossi University of Chicago George Tauchen Duke University We undertake a comprebensive investigation of price and volume co-movement using daily New York Stock Excbange data from 1928 to 1987.We adjust tbe data to take into account well-known calendar effects and long-run trends.To describe the process,we use a seminonparametric estimate of the joint density of current price change and volume conditional on past price changes and vol- ume.Four empirical regularities are found:(i) positive correlation between conditional volatility and volume;(ii)large price movements are fol- lowed by bigb volume;(iii)conditioning on lagged volume substantially attenuates the 'leverage" effect;and (iv)after conditioning on lagged vol- ume,tbere is a positive risk-return relation. The recent history of the stock market has been char- acterized by sharp downward price movements accompanied by high volume and associated with increased future volatility.On Black Monday II (October 19,1987),the s&P 500 composite index plunged 22.9 percent on the second highest volume This article is based upon work supported by the National Science Foun dation under grants SES-8808015 and SES-8810357,North Carolina Agricul- tural Experiment Station Project NCO-6134,and the Graduate School of Business of the University of Chicago.We are grateful to David Hendry, David Hsieh,William Schwert,Robert Stambaugh,and Tim Bollerslev (the referee)for many helpful comments.Address requests for reprints to George Tauchen,Department of Economics,Duke University,Durham,NC 27706. The Review of Financial Studies 1992 Volume 5,number 2,pp.199-242 1992 The Review of Financial Studies 0893-9454/92/$1.50