Research Of Long-term Relationship Between China's Stock Market Price And Volume

If China's stock market develops healthy, we must have a deep understanding of risk. Therefore, it is an important issue that how to measure the stock market risk. However, risk is associated with volatility. Recently the study of volatility can be divided into two aspects in the stock market:first, the volatility of stock price is studied. Second, the relationship of the volatility and trading volume is researched. The former describes the rules and characteristics of the stock price volatility. The latter investigates the risk through the relationship of the stock market volatility and trading volume. This paper shows the relationship between the different forms of China's stock market price and trading volume, so that we have a better understanding of risk from market behavior, and predict future risk using current risk, so as to avoid the risk.This paper gives the concepts of price and trading volume, and the relationship between the two, introduces the model of the volatility, the method of long memory and a number of related statistical methods. It also studies the long-term relationship between price and trading volume, return and trading volume, volatility and trading volume from the perspective of empirical studies.Innovation of this paper is more comprehensive study of the relationship between China's stock market volume and price. It not only researches the long-term relationship between trading volume and price, trading volume and return, but also uses a real volatility instead of the convertible form of return to study the long-term relationship between trading volume and volatility. We research the relationship of the three so that we can find out changes of China's stock market and understand the financial markets.This paper studies the relationship between the convertible price and trading volume of Shanghai index and Shenzhen index from April 1,1999 to April 1,2009. Empirical results show that:First, the price and trading volume of China's stock market have common long-term memory, and change in the same direction. Second, the return and trading volume of China's stock market do not exist any relationship. Third, the volatility and trading volume of China's stock market have a positive correlation, and there is a common long-term memory between them. The results test and verify the relationship between the price and trading volume further, and offer empirical basis for investors to avoid risk.