Measuring the dynamics of the stock market’s volume-price relationship: a new Hurst-based market-trend index

Peizhi Li, Wenhan Li, Mo Yang and Dongkai Zhao

Applied Economics, 2025, vol. 57, issue 39, 6026-6043

Abstract: Despite the rich literature on the relationship between trading volumes and stock prices, few studies explore the underlying linkage arising from multifractality. Here, we propose a Hurst-based market-trend index measuring the dynamic cross-correlation between volumes and prices, and illustrate its usefulness with applications on the Chinese stock market. We show that the new index can reflect the volume-price relationship’s underlying changes with varying market conditions across different sectors. We also show how the new index dominates the change in the Granger causality. Further economic analyses demonstrate how the new index can be used for improving trading strategies. The insights on the underlying relationship between stock volumes and prices are important for investment decisions and have insightful policy implications.

Date: 2025
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DOI: 10.1080/00036846.2024.2376775

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