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How trading volume responds to return in financial dynamics?

Author

Listed:
  • Chen, Guang
  • Qiu, Tian
  • Jiang, Xiong-Fei
  • Zhong, Li-Xin
  • Wu, Xiao-Run

Abstract

How trading volume responds to price return is investigated by the return–volume correlation dynamics, based on the daily data of two typical financial markets, i.e., the Chinese and the United States stock markets. Whereas the price returns being observed to be positively correlated with the trading volumes for the Chinese stock markets, a significant transition from the positive correlation to negative correlation is revealed for the United States stock markets. Leverage and anti-leverage effects of the return–volume correlations are found for the last decade of the United States stock markets and the Chinese stock markets, respectively. Nonlocal dynamics further suggests an adverse correlation for the two markets. A retarded herding model is introduced to describe the leverage and anti-leverage effects. Our work may shed a new light on the financial dynamics differing in the mature and emerging markets.

Suggested Citation

  • Chen, Guang & Qiu, Tian & Jiang, Xiong-Fei & Zhong, Li-Xin & Wu, Xiao-Run, 2015. "How trading volume responds to return in financial dynamics?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 424(C), pages 73-81.
    • Handle: RePEc:eee:phsmap:v:424:y:2015:i:c:p:73-81
    DOI: 10.1016/j.physa.2015.01.001
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    Citations

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    Cited by:

    1. Wen-Juan Xu & Li-Xin Zhong, 2022. "Market impact shapes competitive advantage of investment strategies in financial markets," PLOS ONE, Public Library of Science, vol. 17(2), pages 1-23, February.
    2. Yue Yang & Changgui Gu & Qin Xiao & Huijie Yang, 2017. "Evolution of scaling behaviors embedded in sentence series from A Story of the Stone," PLOS ONE, Public Library of Science, vol. 12(2), pages 1-14, February.
    3. Doojin RYU & Hyein SHIM, 2017. "Intraday Dynamics of Asset Returns, Trading Activities, and Implied Volatilities: A Trivariate GARCH Framework," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 45-61, June.
    4. Zhong, Li-Xin & Xu, Wen-Juan & Chen, Rong-Da & Zhong, Chen-Yang & Qiu, Tian & Ren, Fei & He, Yun-Xing, 2018. "Self-reinforcing feedback loop in financial markets with coupling of market impact and momentum traders," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 493(C), pages 301-310.

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