China's Stock Market Volume And Price Based On Mdh Empirical Research

The relationship between stock market trading volume and price volatility has always been an important issue in the financial field, for the price-volume relation is an important way not only to know the financial market micro-structure but also to study arbitrary chance or market efficiency. The capital market micro-structure theory also point out that the volatility of the financial asset is relevant closely to information. The volatility of the stock market, in a sense, is a reflection of the stock market assimilating, estimating and making use of the new information flow. The trading volume, acting as a proxy of information flow, conveys a kind of price signal, Therefore, It is very necessary to study the stock market volatility from the trading volume, moreover, the Chinese Stock Market having been deviation from the macro-economics in recent years strengthen the necessity of studying stock market volatility from the market micro-structure theory.This paper starts with the financial market micro-structure theory. It takes trading-volume as a vital factor in the process of the price adjustment, and quotes the MDH (Mixture Distribution Hypothesis) to explain the price-volume relation. It also sets forth how trading-volume infecting the price and how the trading-volume interpreting the volatility. The text can be divided into five parts.The first part mainly states the necessity and importance of studying the price-volume relation and defines the actual and theoretical significance of taking trading volume as an information flow to interpret volatility.The second part introduces the study framework of MDH at first, then on the basis of which, it designs the empirical method to test MDH-adding different volume in the GARCH-M ( Autoregressive conditional heteroskedasticity in-mean ) model.The third part and the forth part is the process of the empirical test of MDH in Chinese Stock Market. At first, it cites MDH to interpret the price-volume relationof the Shanghai Composite Stock Index. Then considering the difference of the Composite Stock Index and single stock, for example, the single stock has price limit, It continues to quote MDH to study the price-volume relation of the single stock too.The last part is conclusion with some policy suggestions in addition.