Price-Volume Relations in Financial Market

Weihong Huang () and Wanying Wang
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Wanying Wang: Division of Economics, Nanyang Technological University, Singapore 637332, Singapore

No 1209, Economic Growth Centre Working Paper Series from Nanyang Technological University, School of Social Sciences, Economic Growth Centre

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.

Keywords: Price-volume relations; Heterogeneous beliefs; Technical analysis; Deterministic nonlinear dynamics (search for similar items in EconPapers)
JEL-codes: C63 G12 G17 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2012-09
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Persistent link: https://EconPapers.repec.org/RePEc:nan:wpaper:1209

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