This study investigates the microstructure relationship of prices and trading volume for underlying stocks of Taiwan 50 Index over the period 2005-2007. The main purposes are to explore if these variables, such as trading volume, opening volume, closing volume, intraday volume volatility, margin buying, short selling, and institutional investors’ trade will affect stock returns, and several important findings are shown as follows：
1.Aspect of Volume：There is a significant positive effect from trading volume to stock returns. While trading volume increases, the stock return will raise up. The opening and closing 15 minutes trading volume are negatively related to stock returns, It means the higher the opening and closing trading volume, the lower the stock returns, and the closing trading volume will lower down the share price in comparing with the opening trading volume.
2.Aspect of Credit trade：Margin buying is negatively related to stock returns, since it is the future selling force in share market. In this empirical study, margin buying will decline share price in the future. Similarly, short selling is positively related to share price, because it is the buying force in the future, this illustrates the increase of short selling will increase the future share price. Thus, margin buying and short selling deemed as negative indicators are confirmed in this study.
3.Aspect of trading of institutional investors：The signal of net buy trading volume from foreign institutional investors at time t-1 will raise the share price at time t, and the higher the trading volume from foreign institutional investors including buying and selling amount also will lift up the share prices. However, this phenomenon is not shown in trading from investment trust institution and dealers.