If the trading amount is adjusted for the fluctuation rate, Mr. Hiroshi Kouya

Cannot find meaning in the recent surge in large trading activity Publish date: 2020/03/28 11:47

Over the past three weeks, the Tokyo Stock Exchange First Section's trading value has continued to exceed 3 trillion yen in large trading activity. Typically,
trading value is also called market energy, and is thought to be the driving force behind rising stock prices.

However, looking from a different perspective, the increased trading activity accompanies large price moves,
but there are trading values that do not have the power to push stock prices higher.

Just as GDP has nominal and real terms, by measuring trading value by price movement to make it “real,” the degree of market strength or weakness can be understood.


The trading value and stock price volatility, and the trading value per unit of volatility since October last year when the market was firm,
are shown in the table below.

Trading value Volatility Trading value/Volatility Change rate
October: 20,829億円 0.60% 34,766億円 +5.38%
November: 22,415 0.81% 27,672 +1.60%
December: 18,724 0.54% 34,674 +1.56%
January: 20,922 0.79% 26,483 -1.91%
February: 25,782 1.22% 21,132 -8.89%
March: 36,120 4.07% 8,874 -8.29%
Note: Volatility = (High − Low) ÷ Closing price; Change rate is the month-end change of the Nikkei Average.
March data through the 27th.

From the above table, the change rate seems closely related to trading value per unit of volatility.
This month's large trading activity of 3 to 4 trillion yen has no bearing on stock-price movements.
It is simply trading activity that accompanies large price swings in both directions.
and nothing more.

Even so, intraday price range and intraday volatility have a significant influence on stock prices. When price moves are large, the large trading activity per unit of volatility tends to be thin in substance.



The most important point is for price movements to calm down. For both Japan and the U.S.,
the subsiding of COVID-19 concerns and calmer price movements will be the key for stock prices to regain their firmness.
That is the point.

Written by Hayakawa