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The Price-Volume Relationship in China's Commodity Futures Markets

Author

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  • GONGMENG CHEN
  • MICHAEL FIRTH
  • YU XIN

Abstract

This study examines the relationship between returns and trading volume of four actively traded commodity futures contracts in China. Correlation analyses and Granger causality tests are used to investigate contemporaneous and lead-lag relationships between trading volume and both signed and absolute return. We find that the contemporaneous correlations between return and trading volume are not significantly different from zero, and there is no linearly significant causality following from trading volume to return or from return to trading volume. However, the contemporaneous correlations between absolute return and trading volume are significantly positive in all futures markets, and there is a significant relationship of causality following from absolute return to trading volume, which contradicts the mixture of distributions hypothesis and supports the sequential information arrival hypothesis in all of the futures markets examined except for aluminum futures. We also find a significant causality following from trading volume to absolute settlement-to-settlement return in the copper (subsample 1) futures market, but not in the copper (subsample 2) futures market.

Suggested Citation

  • Gongmeng Chen & Michael Firth & Yu Xin, 2004. "The Price-Volume Relationship in China's Commodity Futures Markets," Chinese Economy, Taylor & Francis Journals, vol. 37(3), pages 87-122, May.
    • Handle: RePEc:mes:chinec:v:37:y:2004:i:3:p:87-122
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    Cited by:

    1. Go, You-How & Lau, Wee-Yeap, 2020. "The impact of global financial crisis on informational efficiency: Evidence from price-volume relation in crude palm oil futures market," Journal of Commodity Markets, Elsevier, vol. 17(C).
    2. Martin T. Bohl, Pierre Siklos, Claudia Wellenreuther, 2018. "Speculative Activity and Returns to Volatility of Chinese Major Agricultural Commodity Futures," LCERPA Working Papers 0111, Laurier Centre for Economic Research and Policy Analysis, revised 30 Jan 2018.
    3. Jia-Jan Lee, 2019. "The Study on the Correlation between Wholesale Price and Trading Volume in Taiwan Milkfish Market," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 7(2), pages 73-81, June.
    4. Sarika Mahajan & Balwinder Singh, 2008. "An Empirical Analysis of Stock Price-Volume Relationship in Indian Stock Market," Vision, , vol. 12(3), pages 1-13, July.
    5. Bohl, Martin T. & Siklos, Pierre L. & Wellenreuther, Claudia, 2018. "Speculative activity and returns volatility of Chinese agricultural commodity futures," Journal of Asian Economics, Elsevier, vol. 54(C), pages 69-91.
    6. Rehman, Mobeen Ur & Vo, Xuan Vinh & Ko, Hee-Un & Ahmad, Nasir & Kang, Sang Hoon, 2023. "Quantile connectedness between Chinese stock and commodity futures markets," Research in International Business and Finance, Elsevier, vol. 64(C).

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