Investor Structure And Price-volume Relationship

The price-volume relationship has been the focus of financial economics for a long time.Scholars come up with different hypothesis to explain this phenomenon,such as sequential information arrival hypothesis(SIAH)and mixture of distribution hypothesis(MDH).This article simulates an artificial stock market based on the continuous double auction model.By changing the investor structure,which symbolized by the ratio of the number of informed investors and the number of all the investors,we investigate the validation of MDH and SIAH in explaining price-volume relationship.Then,we change the learning speed of the informed investors and conduct the above tests again.We find there is a significant causality relationship between the return volatility and trading volume when the informed investors are not significantly in the majority.However,as the the informed investors continue entering the market,we observe contemporaneous relationship between the return volatility and trading volume.Taking the learning speed into consideration,we find the stock market including the informed agents with lower learning speed tends to display the lead-lag relationship more often and the stock market including informed agents with higher learning speed tends to display contemporaneous price-volume relationship more often.We conclude that the investor structure is a key factor in effecting the price-volume relationship.This article contributes to the previous studies that it considers the characters of the informed investors including the ratio and learning speed,who are the most important component of the micro structure of the financial market,into explaining the price-volume relationship.