Empirical On Volume-return Relation Of China A Shares

The aim of study is finding the principle of market. Especially, finding the discipline of volatility of stock price. Fama(1970) proposed the EMH, which suggests that the stock price is random walk. Therefore, it is impossible to find the rules of volatility for stock price. But, in the real world, we do find the weekend effect, announcement effect. These effects suggests there is a discipline in the stock market., and we can find it.What is the meaning of relationship between trading volume and stock prices? How to confirm the foundation of relationship between trading volume and stock prices? How to find the theory framework, which explains Dynamic volume-return relation of individual stocks. What are the determinants for this relationship? Such as abnormal trading volume, stock price and asymmetric information, and so on. This paper will try to answer these questions.Volume-return relation is the dynamic volume-return relation of individual stocks. That means the relationship between volume and return is negative. In this paper, we build theory framework and the empirical framework to study this relationship.Firstly, we studied CGW(1993), Wang(1994) and Wang(2002). CGW(1993) builds a framework to interpret the rule of Volume-return relation under the symmetric information background. Wang(2002) builds a framework to interpret the rule of Volume-return relation under the asymmetric information background. They find that the rule of Volume-return will not change with the information background.Second part is empirical models, we use the data from CSMAR and WIND, the data includes all China A shares except the Chuanye Board.Finally, we find the Volume-return relation in Chinese stock market. It is found that the Volume-return relation will not change with the information background.This thesis includes seven chapters. Chapter one is the preface, which introduces the research background, structure, purpose, methodology, innovation and drawbacks of our study.Chapter two is a briefly introduce the definition of volume-return relation and current research progress on the topic. According to the theory by CGW(1993)、 Wang(1994)、 Wang(2002), if there is abnormal trading volume, we will find that expect return will reverse. These literature also studied further on why the Volume-return relation will change with the information background? They find that the information background will affect the nature of dynamic volume-return relation. If the difference of asymmetric information increases, the probability of reversing will increase.Chapter three studies the literature on measurement of trading volume and stock price respectively. we adopt the return to measure stock prices and the turnover rate to measure the trading volume. In this study, the turnover rare equals the ratio of trading volume to liquidity shares. All variables are measures in log forms.Chapter four presents the empirical framework of our study. Firstly, we choose the suitable variables. Wang(1993)、Wang(2002)、G.Andrew Karoly (2006) use bid-ask price, market value, number of analysts to measure the asymmetric information. In our model, we use the market model to measure r_square to measure the asymmetric information, and use the framework based Wang(2002) to measure the abnormal trading volume. The difference between the largest market value and the smallest market value is very significant, so we apply certain techniques to solve the problem.Chapter five is the data summary. It gives details on sample period, selection of data types, selections of variables, and the summary statistics on data. Our data includes all A share listed firms from1990to2010. Also, due to the split share structure reformation in Chinese stock market, there are some structure breaks in our sample period. We have adjusted our sample data to solve this problem.Chapter six analyze the regression results. We find there are significant volume-return relation in Chinese stock market. And we carry on to study the asymmetric information effects in the market.Chapter seven is the conclusion. It is found that the volume-return relation in Chinese stock market is significant, and this significance will not change by the institutional factors and market conditions. In the end, we proposed three future research direction on the volume-return relation.The main contributions of the thesis are as follows:1. we use the r_square to measure asymmetric information, and then test the effect of asymmetric information.2. The volume-return effect usually lasts for2days in U.S. market, but in China, it will last for3-5days.3. we study the volume-return relation under Chinese market conditions. Some institutional factors in Chinese market have been considered in the research.