Forecast of stock price fluctuation based on the perspective of volume information in stock and exchange market

Abstract

Purpose

In the process of discussing the relationship between volume and price in the stock market, the purpose of this paper is to consider how to take the flow of foreign capital into consideration, to determine whether the inclusion of volume information really contributes to the prediction of the volatility of the stock price.

Design/methodology/approach

By comparing the relative advantages and disadvantages of the two main non-parametric methods mainstream, and taking the characteristics of the time series of the volume into consideration, the stochastic volatility with Volume (SV-VOL) model based on the APF-LW simulation method is used in the end, to explore and implement a more efficient estimation algorithm. And the volume is incorporated into the model for submersible quantization, by which the problem of insufficient use of volume information in previous research has been solved, which means that the development of the SV model is realized.

Findings

Through the Sequential Monte Carlo (SMC) algorithm, the effective estimation of the SV-VOL model is realized by programming. It is found that the stock market volume information is helpful to the prediction of the volatility of the stock price. The exchange market volume information affects the stock returns and the price-volume relationship, which is achieved indirectly through the net capital into stock market. The current exchange devaluation and fluctuation are not conducive to the restoration and recovery of the stock market.

Research limitations/implications

It is still in the exploratory stage that whether the inclusion of volume information really contributes to the prediction of the volatility of the stock price, and how to incorporate the exchange market volume information. This paper tries to determine the information weight of the exchange market volume according to the direct and indirect channels from the perspective of causality. The relevant practices and conclusions need to be tested and perfected.

Practical implications

Previous studies have neglected the influence of the information contained in the exchange market volume on the volatility of stock prices. To a certain extent, this research makes a useful supplement to the existing research, especially in the aspects of research problems, research paradigms, research methods and research conclusion.

Originality/value

SV model with volume information can not only effectively solve the inefficiency of information use problem contained in volume in traditional practice, but also further improve the estimation accuracy of the model by introducing the exchange market volume information into the model through weighted processing, which is a useful supplement to the existing literature. The SMC algorithm realized by programming is helpful to the further advancement and development of non-parametric algorithms. And this paper has made a useful attempt to determine the weight of the exchange market volume information, and some useful conclusions are drawn.

Citation

Chen, S., Sun, Y.-l. and Liu, Y. (2018), "Forecast of stock price fluctuation based on the perspective of volume information in stock and exchange market", China Finance Review International, Vol. 8 No. 3, pp. 297-314. https://doi.org/10.1108/CFRI-08-2017-0184