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Price-Volume Relations in Financial Market

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  • Weihong HUANG

    (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore)

  • Wanying Wang

    (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore)

Abstract

Though the price-volume relations are widely documented by practitioners and empirical studies, few theoretical models can reproduce these relations and provide persuasive arguments. By simply generalizing the classical market maker framework, our heterogeneous agent model not only simulates satisfactorily the seemingly chaotic fluctuations in price and volume in a way that is highly compatible with the real market, but replicates patterns in the movements of price-volume, particularly those patterns used in technical analysis. Most importantly, based on this model, plausible economic arguments are provided to support the rationale of correlations between asset returns and volumes.

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File URL: http://www3.ntu.edu.sg/hss2/egc/wp/2012/2012-09.pdf
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Bibliographic Info

Paper provided by Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre in its series Economic Growth centre Working Paper Series with number 1209.

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Length: 35 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:nan:wpaper:1209

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Fax: 6794 2830
Web page: http://egc.hss.ntu.edu.sg/
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Related research

Keywords: Price-volume relations; Heterogeneous beliefs; Technical analysis; Deterministic nonlinear dynamics;

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References

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