An Empirical Study On Volume-Price Relationship In China's Stock Market

The trading volume and price relationship in a stock market has been most concerned by the foreign and domestic experts and scholars, and their study can be applied to many financial and economic areas. In the stock market technical analysis, stock price movements depend on changes in market supply and demand, which is reflected in large part by price (index or stock price) associated with volume changes. Trading volume is not only used as the driving force behind price fluctuations, but also as leading indicators of price changes. Actually it has a very important position. Therefore, the study on the volume and price in a stock market has a very important theoretical and practical significance. On the basis of using the latest data of Shanghai and Shenzhen stock market, the data of SME Board and Shanghai-Shenzhen 300 index is introduced as the same time, the study of this article reflects the multi-level structural characteristics of China's stock market. By comparing the results of different markets, we can understand the volume and price relationship better in China's stock market.By using ADF test, Granger causality test, ARMA, we investigate the causal link between the volume and price, and EGARCH model to research the relationship between yield volatility and volume in stock market. The empirical results show that the dynamic relationship between volume and price does clearly exist. It's also proved that the stock yield does greater impact on the volume than the volume does on stock yield. Trading volume plays the role of decreasing the yield volatility persistence in a certain extent. It is the unexpected volume plays a leading the relationship between volume and price. This article shows that the volume of China's stock marker contain relevant information about price changes. This supports the determination that China's stock market is not a weak efficient market yet. It also provides a better theoretical support to t he technical analysis based on volume and price relationship in stock market. Meanwhile, the analysis also found that china's stock market is basically consistent with MDH. Although china's stock market is gradually moving towards mature market, but in comparison with foreign mature markets there are still significant deficiencies.