Chinese Stock Market Volatility And Trading Volume Related To Empirical Research

Traditional financial theory attaches much importance on the price of financial assets, such as portfolio theory, capital asset pricing model, B-S option pricing model and arbitrage pricing theory. With the development of microstructure financial theory, a long forgot factor find its way out—trading volume. To be frankly, volume is not a strange in the "technical analysis" which is widely used till now, as the old Wall Street adage says, " It takes volume to move prices". But the role of volume in academic field is still unveiled.This paper investigates the relationships between return rate, return volatility and trading volume of China Stock Market. Empirical analysis is the main method in the paper which is about dynamic characteristics between the trading volume and return.The paper studied the inherent structure of trading volume, and separates the trading volume series, and measure the return volatility by EGARCH(1, 1) model in order to study the dynamic characteristics between the trading volume and return volatility. We find that there is a kind of dynamic interdependence between the trading volume and return. Especially, expectable trading volume plays an important role. The study indicates trading volume contains useful information about the return, and then technical analysis is a comparatively effective means. In Chinese stock market, the existence of "Leverage Effects" is not very significant. It is probably because the restrictions of short selling transactions, investors' psychology, and the Government's intervention in the stock market. The relation between volume and price is positive but not significant, which means that investors can not completely rely on technical analysis, but can only be used as a supplementary analysis of the Methods.