The Dynamic Relationship Among Return, Volatility and Trading Volume in China Stock Market -An Empirical Study Based on Quantile Regression

Investigating the relationships among return, volatility and trading volume is very important. Traditional econometric methods only estimate their "average" relations, which usually generates biased results. Unlike the existing literature, this paper adopts quantile regression. Using data from Shanghai and Shenzhen Stock Exchanges in China, this study shows that there exists significantly positive and asymmetric relationship between stock returns and trading volumes; i.e, a small (large) volume is associated with a fall (or rise) in price. The volatility and trading volume are also positively correlated; i.e., higher price fluctuation is associated with larger trading volume. The policy implication is that regulations in Chinese stock market can have a significant impact on investors' risk aversion.