The Price-Volume Relationship of the Shanghai Stock Index: Structural Change and the Threshold Effect of Volatility

Panpan Wang, Tsungwu Ho and Yishi Li
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Panpan Wang: School of Finance, Zhejiang Gongshang University, Hangzhou 310018, China
Tsungwu Ho: College of Management, National Taiwan Normal University, Taipei 106, Taiwan
Yishi Li: School of Economics and Management, Tongji University, Shanghai 200092, China

Sustainability, 2020, vol. 12, issue 8, 1-17

Abstract: The price–volume relationship of stocks can be impacted substantially by structural changes and market volatility. In this paper, we analyze China’s stock market behavior and subsequent price–volume equation, with emphasis on two periods of market volatility and structural changes during 2007–2008 and 2015–2016. To account for the impacts of unknown volatility and time breaks, we embed the price–volume relationship into a vector autoregression (VAR) framework with structural breaks and volatility thresholds. Our results indicate that significant time-breaking effects exist and that the high-low volatility effects are substantial. Finally, in its entirety, we identify only a linear causal relationship from price to volume.

Keywords: Price-volume dynamics; structural change; market uncertainty; threshold VAR; Shanghai stock market (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
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