 Examining Chinese volume–volatility nexus: A regime-switching perspectiveZhenxin Wang, Shaoping Wang, Yayi Yan and Yingcun Xia Economic Modelling, 2025, vol. 144, issue C Abstract: This study developed an observation-driven endogenous regime-switching model to observe the relationship between trading volume and return volatility based on a regime-switching perspective. We proposed a maximum likelihood estimation method to estimate the unknown parameters and introduced two likelihood ratio statistics to examine the effects of observable variables on regime shifts. We conducted extensive simulation experiments, confirming that the method performed well regarding finite samples. We applied the proposed model to examine the volume–volatility nexus in China’s stock market. Empirical findings indicate that (1) the relationship between trading volume and volatility is regime specific, (2) the Sequential Information Arrival Hypothesis (SIAH) was more significant in the low-volatility state, and (3) a significant leverage effect can be observed in the Chinese stock market. Keywords: Leverage effect; Regime-switching model; Sequential Information Arrival Hypothesis; Stock return volatility; Trading volume (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:144:y:2025:i:c:s0264999324003407 DOI: 10.1016/j.econmod.2024.106983 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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