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Untangling the nexus of stock price and trading volume: evidence from the Chinese stock market

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  • Shyh-Wei Chen

    (Department of Finance, Da-Yeh University)

Abstract

This paper explores the linear and non-linear causal relationship between stock price and trading volume in China. The empirical results substantiate that there is a long-run level equilibrium relationship between the stock price and trading volume in China. The results from the linear causality tests indicate that there is unidirectional causality running from price to volume for the case of Shanghai B and Shenzhen B shares in the short-run, but there is a bidirectional causal relation between price and volume for the case of Shanghai A share and Shenzhen A share. In the results of the non-linear Granger causality, evidence shows that there is neutral price-volume relation for Shanghai B share. However, there is a bidirectional non-linear price-volume causal relation for the case of Shanghai A share and Shenzhen A share. For the case of Shenzhen B share, there is a unidirectional non-linear Granger causal relationship running from the stock price to the trading volume.

Suggested Citation

  • Shyh-Wei Chen, 2008. "Untangling the nexus of stock price and trading volume: evidence from the Chinese stock market," Economics Bulletin, AccessEcon, vol. 7(15), pages 1-16.
    • Handle: RePEc:ebl:ecbull:eb-08g10010
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