Empirical Analysis Of The Relationship Between Price And Trading Volume In China’s Stock Market

As an important part of technical analysis theory, the relationship betweenvolume and price has been one of the hot topics in the financial sector, withfar-reaching impact on the investment behavior of stock investors. In order tosystematic explain the relationship between volume and price, the paper whichchooses Shanghai and Shenzhen stock market as research object and takes theempirical analysis as the main method, combines with normative analysis andinvestigates the characteristics of the price-volume relationship in Chinese stockmarket comprehensively in an angle of the internal structure of volume, the staticand dynamic relationship between volume and price changes and the relationshipbetween volume and condition volatility of return.This paper is divided into six parts: the first chapter is the introduction. It is tobriefly introduce the purpose, significance, research methods, content, innovationand so do. The second chapter is literature review. In order to lay a good theoreticalbasis for empirical analysis below, the chapter does a simple elaboration and reviewof the theoretical basis of the relationship between volume and price in domestic andforeign. The third chapter is to undertake descriptive statistical analysis and stabilitytesting of return and volume series, and volume series are decomposed expectedtrading volume and unexpected trading volume. Firstly, this part analyzes the mean,standard deviation, skewness and kurtosis and other basic statistical characteristics ofthe return and volume. Then, it is to take unit root test for return series, expectedtrading volume and unexpected trading volume, draw a conclusion: they all arestationary sequence. The fourth chapter analyzes the static and dynamic relationshipbetween stock price volatility and trading volumes series which explores the staticrelationship by establishing regression models and tests the dynamic relationshipwith Granger causality test. The fifth chapter uses GARCH model to make anin-depth research on the relationship between volume and condition volatility of return and does a detailed explanation to the results, which based on autoregressiveconditional heteroskedasticity model can portray the volatility of return on assets.The sixth chapter is the conclusion and outlook. This chapter has made a summary toimportant conclusion which derived from the article and is looking forward to future.Through the comprehensive and systematic analysis to the relationship betweenvolume and price in Chinese stock market, we can find that the relationship is notonly a static relationship, but also a significant two-way Granger causality, and thelink is the unexpected trading volume. Meanwhile the unexpected trading volumehas a strong explanatory power on the stock price volatility. This shows that tradingvolume contains important information about the impact of price changes in China’sstock market and provides a good theoretical basis for technical analysis based onthe relationship between volume and price. The fluctuation of return appearsasymmetric effect in Shanghai and Shenzhen stock market, which means the moreeffect on stock market volatility with greater trading volume than the same degree ofshrinkage. The impact of unexpected trading volume on the stock market volatilityappears leverage effect, which means bad news for the magnitude of fluctuations inyields caused significantly greater than good news.