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Momentum Trading, Mean Reveral and Overration in Chinese Stock Market

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  • Yangru Wu

    (Rutgers University)

Abstract

This paper considers the relationship between traded volume and volatility. We employ short sales data to discriminate between transactions that close existing long positions and transactions that establish new short positions. We test for, and where appropriate, incorporate non-linearity and asymmetry into the modelling process. The evidence supports a non-linear, bi-directional relationship between volume and volatility. The results suggest (i) that the market displays greater volatility following a period of short selling and (ii) that asymmetric responses to positive and negative innovations to returns appear to be exacerbated by short selling.

Suggested Citation

  • Yangru Wu, 2004. "Momentum Trading, Mean Reveral and Overration in Chinese Stock Market," Working Papers 232004, Hong Kong Institute for Monetary Research.
    • Handle: RePEc:hkm:wpaper:232004
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    References listed on IDEAS

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