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Price-Volume Relations in Financial Market

Author

Listed:
  • 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.

Suggested Citation

  • Weihong HUANG & Wanying Wang, 2012. "Price-Volume Relations in Financial Market," Economic Growth Centre Working Paper Series 1209, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
  • Handle: RePEc:nan:wpaper:1209
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    References listed on IDEAS

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    More about this item

    Keywords

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

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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