Trade size, trade frequency, and the volatility‐volume relation

Frederick (Fengming) Song (Department of Finance and International Trade, School of Economics and Management, Tsinghua University, Beijing, China)
Hui Tan (Department of Finance and International Trade, School of Economics and Management, Tsinghua University, Beijing, China)
Yunfeng Wu (Department of Finance and International Trade, School of Economics and Management, Tsinghua University, Beijing, China)

Journal of Risk Finance

ISSN: 1526-5943

Publication date: 1 December 2005

Abstract

Purpose

The Chinese stock market is a typical emerging market with special features that are very different from those of mature markets. The objective of this study is to investigate whether and how these features affect the volatility‐volume relation for Chinese stocks.

Design/methodology/approach

This paper examines the roles of the number of trades, size of trades, and share volume in explaining the volatility‐volume relation in the Shanghai Stock Exchange with high frequency trade data used.

Findings

The results confirm that the volatility‐volume relation is driven mainly by the number of trades on the Chinese stock market. The number of trades explains the volatility‐volume relation better than the size of trades. Furthermore, some results are obtained that differ from those of mature markets, such as the US market. The results show that the second largest sized trades affect the volatility more than other trades on the Chinese market.

Originality/value

The results show that, in the Shanghai Stock Exchange, informed traders camouflage their private information or manipulation behavior through the second largest sized trades. The results may have important implications for work explaining the volatility‐volume relation on the Chinese stock market, further providing a reference by which to regulate emerging markets.

Keywords

Citation

Song, F., Tan, H. and Wu, Y. (2005), "Trade size, trade frequency, and the volatility‐volume relation", Journal of Risk Finance, Vol. 6 No. 5, pp. 424-437. https://doi.org/10.1108/15265940510633497

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2005, Emerald Group Publishing Limited

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