Empirical Analysis Of The Relationship Between Price And Trading Volume In China's Stock Markets

The development of China's stock market has formed the considerable scale, because of unique ownership structure of China's listed companies, as well as the unique characteristics of the rights and interests market, the study on the volume-price relationship of China's stock market shoule be analysed concretely. Trading volume as one of the most accessible and disposable information resources in the stock market , not only directly reflects the supply and demand of the stock market,but also provides valuable information to predict changes in the prices of stocks,i.e.stock returns. As the volume-price relationship is the important cornerstone for technical analysis theory of stocks, as well as one of the major means to judge trends of the market or individual stock for the vast number of investors in the investment practice, therefore, theoretical research on volume-price relationship in the financial field has been one of the hot topics. This paper studies the impact relationship between price and volume, i.e. volume-price relationship, with the purpose to inspire the monitors and investors.The paper mainly discusses the volume-price relationship and the relationship between the trading volume and price volatility . we use Granger causality test to investigate the causal link between the price and volume,and EGARCH model to researche whether the trading volume explain the ARCH effect on the stock market incomes. In this paper, the purpose of the study is to proceed the empirical study on relationship between volume-price and volatility in China's stock market comprehensively and systemicly by the latest data . According to empirical results, comparing with the the relevant conclusions from mature Western capital markets, we can evaluate the development of China's stock market and propose appropriate policy recommendations. This paper is divided into four parts.The first chapter of the article is the model presentation and literature review. The first part introduces the theoretical models of volume-price relationship, mainly for following types of models:the mixed distribution hypothesis model, information consistent sequence arrived model, noise transactions rational expectations equilibrium model and judging difference model. The second part is literature review.It will summarize the study on volume-price relationship from domestic and foreign scholars,concluding into the more mature research results, which will be divided into three aspects:the research on the correlativity, the dynamic relationship, and relationship bwtween trading volume and the volatility of the market.The third part is research backgrounds and meanings of volume-price relationship in the stock market as well as the research methods. We will discuss the theoretical and practical significances that the trading volume explains the price volatility , and give a briefing on the structure of the paper and research methods.Chapterâ…¡focuses on the volume-price relationship in stock market. the data used in this chapter are Shanghai Composite Index and Shenzhen Components Index and their corresponding daily turnover data from Shanghai Stock Exchange and Shenzhen Stock Exchange. The data in this paper will be divided into two periods: the early days of the stock market to 1996.12. 16 and from 1996.12.17 to 2007.12.28 . The data are from Tonghuashun Securities Information Platform. The empirical analysis in this chapter is completed basing on Eviews5.0 software. We do the basic statistical analysis on the yield and the trading volume sequences,analysing from the selection basis for samples and periods division, yield and statistical characteristics, yield and stability, the processing of trading volume sequences, smooth test of transaction volume sequences and other aspects, including the econometric methods of yield logarithm differential treatment, and using ARMA model decomposing trading volume sequences, ADF test. The core of this chapter is to investigate the dynamic causal volume-price relationship with the Granger causality test. The Granger influence of the yield on the transaction volume is greater than the influence of expected trading volume on the yield. In addition, the Granger causality test results of unexpected trading volume on the yield are more significant than that of expected trading volume, which means that the Granger cause of trading volume on the yield is mainly from the explanation capacity of the unexpected transaction volume,but the impact explain capacity of the expected transaction volume is very small . At the same time it shows that the trading volume contains some information, which will assist traders to adjust the expectations of the balanced price.Chapterâ…¢is the core part of this paper,it will study the conditional volatility relationship between the volume and yield ,we firstly introduce the research framework of GARCH model , and then choose the empirical methods on this basis, that is, with EGARCH (1,1) model, better revealing the non-symmetry, persistence and concentration of the yield fluctuations in China's stock market. Non-symmetry means that there are also significant negative leverage in the yield volatility in the stock market. The yield of China's stock market exists significant EGARCH phenomenon, and price fluctuations show clusters and enduring features. The accession of trading volume reduces the continuing of the volatility to a certain extent,but after dividing the volumes into expected and unexpected, we find that the influences of these two parts to the fluctuations of the yield are different, there are not any apparent relevance between expected turnover changes and price volatility, but the unexpected part is not only in a positive correlation with the expected volatility in the same period, but also providing predictive information for next phase of volatility, although the prediction function is extremely limited. This chapter concludes that the expected volume will not affect price fluctuations, or reflecting China's stock market is efficienct in a certain degree from one side. Overall, though China's stock market is gradually moving towards maturity, but there are still many significant differences compared with the mature Western capital markets.Chapterâ…£is the conclusion part of the full text, and makes a number of policy recommendations accordingly.The paper comprehensively studies the volume-price relationship in the stock market, reflecting basic features of volume-price relationship in China's stock market, and there are more literatures that are from one specific aspect to start the study, not from the viewpoint of integrity. The data used in this paper is the latest in similar studies, and sample size is large enough,the contained information is also enough. On the basis of previous studies,the paper introduces the asymmetric EGARCH model which can describe fluctuations in the stock market well,into the empirical study of the volume-price relationship in China's stock market, and finds the general and special traits of volatility in China's stock market in the new perspective. Through the research, we find that further studies on the volume-price relationship have extremely important theoretical and practical significances.