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The Relation between Price Changes and Trading Volume: A Survey


This paper reviews previous and current research on the relation between price changes and trading volume in financial markets, and makes four contributions. First, two empirical relations are established: volume is positively related to the magnitude of the price change and, in equity markets, to the price change per se. Second, previous theoretical research on the price-volume relation is summarized and critiqued, and major insights are emphasized. Third, a simple model of the price-volume relation is proposed that is consistent with several seemingly unrelated or contradictory observations. And fourth, several directions for future research are identified.

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Journal of Financial and Quantitative Analysis
  • ISSN: 0022-1090
  • EISSN: 1756-6916
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