The Product Market Power and Trade Volume of Stock Market : An Explanation Based on Heterogeneous Beliefs

Based on the data of companies listed on A-share market during the year 2001 to 2009, this paper explores the relationship between product market power and trade volume in the view of heterogeneous beliefs. It's found that the improvement of product market power significantly promotes trading, which is consistent with the study of Peress (2010). However, the level of heterogeneous beliefs will also be improved and result in higher trading volume, which is consistent with our expectation. Besides, our results suggest significantly positive relationship between product market power and volume per trade