The Research Of The Secondary Stock Market Trading Volume Based On Double Auction Trading Mechanism

The purpose of research on the secondary stock market trading volume is to explore the formation mechanism of the volume. Therefore, it is necessary to answer three fundamental questions for the task. First, how does the double auction trading mechanism function? Second, what is the relationship between the assumption of heterogeneous investors and the volume? And third, what is the relationship between volume and information? Among these fundamental questions, the latter is based on the former.The main content of this article is divided into seven chapters.The first chapter introduces the research background and methods as well as the content and structure.The second chapter is literature review. Research on secondary stock market trading volume mainly focuses on the following three aspects:the relationship between volume and price, the relationship between trading volume and the information, as well as the relationship between volume and price change. This chapter introduces the above content and the double auction trading mechanism.The third chapter establishes the basic model. This section determines to select double auction as the market trading mechanism, and improve the random pairing trading mechanism used by Karpoff (1986).The fourth chapter defines "normal" trading volume, and made a comparative static analysis for it. This way of analysis ruled out the interference by many essential factors in the market.The fifth chapter expanded foundation model. The classic relationship between volume and price is discussed in this section. It includes volume is bigger when price is high and vice instead and volume increases as prices rise and decreases as prices fall.Chapter6discusses the relationship between investors’ behavior and trading volume. The problem this chapter mainly solves is the relationship between volume and information. This section systematically describes two independent events which could affect the volume:one is the view consistent with the empirical research of speculation, in which investors differences resulted in the increase of volume; Secondly, before a period begin, buyers and sellers’ different expectations make the volume change. Through this analysis, using the basic framework of the model, this article completely solved the third problem put forward.Chapter7summarizes the full text, and put forward the outlook for future research.The main contributions are as follows;Firstly, using the double auction trading mechanism, this paper provides a new view to analyze the secondary stock market.Secondly, the model’s assumption suggests that relationship between trading volume and information is affected by the market mechanism.Thirdly, conclusion of the model is consistent with the established experience findings:volume will increase with the increase of the depth as the market, and decreases as the price gap increases; volume will always be positive as the investors are heterogeneous; winner curse often arise in the stock market. These conclusions provide theoretical support for empirical research.Last but not least, this paper distinguishes two different ways the information affect the trading volume, and provides a basic principle of information affect the volume information to determine whether an event has information content.