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Investor participation and the volatility-volume relation: Evidence from an emerging market

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  • Bian, Jiangze
  • Chan, Kalok
  • Fong, Wai-Ming

Abstract

Using a unique dataset from the Chinese stock market that keeps track of the daily number of shareholders, we find that the ownership breadth (proxied by the number of shareholders) is negatively related to stock price volatility. However, consistent with the previous literature on volatility-volume relation, we find that the stock price volatility remains positively related to number of traders participating in the market. We also find that the relations of both the daily order imbalance and the daily depth imbalance with the number of shareholders (traders) are negative (positive). Our results suggest that a higher number of shareholders tend to supply liquidity and reduce volatility, while a higher number of traders tend to compete for liquidity and increase volatility.

Suggested Citation

  • Bian, Jiangze & Chan, Kalok & Fong, Wai-Ming, 2020. "Investor participation and the volatility-volume relation: Evidence from an emerging market," Emerging Markets Review, Elsevier, vol. 45(C).
    • Handle: RePEc:eee:ememar:v:45:y:2020:i:c:s156601411930264x
    DOI: 10.1016/j.ememar.2020.100741
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    References listed on IDEAS

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    Cited by:

    1. Bian, Jiangze & Chan, Kalok & Han, Bing & Shi, Donghui, 2023. "Cross-border equity flows and information transmission: Evidence from Chinese stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 84(C).
    2. Yamani, Ehab, 2023. "Return–volume nexus in financial markets: A survey of research," Research in International Business and Finance, Elsevier, vol. 65(C).

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    More about this item

    Keywords

    Ownership breadth; Volatility-volume relation;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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