A Security Price Volatile Trading Conditioning Model

46 Pages Posted: 3 Jan 2010 Last revised: 19 Feb 2010

See all articles by Leilei Shi

Leilei Shi

Haitong Securities Co. Ltd.----Beijing Fuwaidajie; International Institute of Finance, School of Management, University of Science and Technology of China (USTC)

Yiwen Wang

Beihang University (BUAA)

Ding Chen

Van Gold Asset Management

Liyan Han

Beihang University (BUAA) - School of Economic and Management Science

Yan Piao

Complex System Research Group

Chengling Gou

Beihang University (BUAA)

Date Written: December 29, 2009

Abstract

We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use transaction volume probability to describe price volatility uncertainty and intensity. Applying the model to high frequent data test in China stock market, we have main findings as follows: 1) there is, in general, significant positive correlation between the rate of mean return and that of change in trading conditioning intensity; 2) it lacks significance in spite of positive correlation in two time intervals right before and just after bubble crashes; and 3) it shows, particularly, significant negative correlation in a time interval when SSE Composite Index is rising during bull market. Our model and findings can test both disposition effect and herd behavior simultaneously, and explain excessive trading (volume) and other anomalies in stock market.

Keywords: behavioral finance, transaction volume-price probability wave, price volatility, trading conditioning, disposition effect, herd behavior, excessive trading, econophysics

JEL Classification: G12, G11, D03, D53, D83, D16

Suggested Citation

Shi, Leilei and Wang, Yiwen and Chen, Ding and Han, Liyan and Piao, Yan and Gou, Chengling, A Security Price Volatile Trading Conditioning Model (December 29, 2009). Available at SSRN: https://ssrn.com/abstract=1530225 or http://dx.doi.org/10.2139/ssrn.1530225

Leilei Shi (Contact Author)

Haitong Securities Co. Ltd.----Beijing Fuwaidajie ( email )

#2010, Tower A
#2 Fuwaidajie, Xicheng District
Beijing, 100037
China
0086+18611270598 (Phone)

HOME PAGE: http://https://www.htsec.com/ChannelHome/4793976/index.shtml

International Institute of Finance, School of Management, University of Science and Technology of China (USTC) ( email )

96, Jinzhai Road
Hefei, Anhui 230026
China
(0086)18611270598,13671328061 (Phone)

Yiwen Wang

Beihang University (BUAA)

37 Xue Yuan Road
Beijing 100083
China

Ding Chen

Van Gold Asset Management ( email )

United States

Liyan Han

Beihang University (BUAA) - School of Economic and Management Science ( email )

37 Xue Yuan Road
Beijing 100083
China

Yan Piao

Complex System Research Group

Austria

Chengling Gou

Beihang University (BUAA) ( email )

37 Xue Yuan Road
Beijing 100083
China

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