Asset Characteristics and Volume-Price Dynamics: Cointegration and Causality Analysis of Cyclical Versus Consumer Core Assets

Jing-Han Chang

Abstract

The classic debate over the dynamic relationship between trading volume and asset prices centers on the Sequential Information Arrival Hypothesis (SIAH) and the Mixture of Distributions Hypothesis (MDH). Existing literature generally aggregates all asset categories into a single analysis, which obscures heterogeneous pricing mechanisms across industries. To fill this gap, this paper examines the heterogeneous volume-price dynamics between strong-cycle assets and weak-cycle core consumer assets in China's A-share market. Using weekly trading data of China Shenhua (601088.SH) and Kweichow Moutai (600519.SH) from 2018 to 2025, this study investigates the long-run equilibrium and short-run causal linkages between stock returns and trading volume via the ADF test, Johansen cointegration test, vector error correction model (VECM), and Granger causality test. It also evaluates whether the well-known Wall Street adage "volume trumps price" holds universally across asset classes. The empirical results reveal significant structural differences between the two assets: the weekly error correction speed of the VECM is 28.36% for China Shenhua and 50.17% for Kweichow Moutai. Specifically, China Shenhua exhibits a long-run cointegration relationship but no significant short-run causality, consistent with macro fundamental anchoring. In contrast, Kweichow Moutai shows a pronounced "price leads volume" causal pattern, which can be explained by liquidity premiums and institutional herding behavior. These findings highlight the necessity of incorporating asset characteristics into market microstructure analysis and provide targeted strategic guidance for investors across different economic cycles.

Source: semanticscholar · PDF

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