This paper proposes a new framework for modeling stock price dynamics by replacing volatility with trading volume.

Instead of centering asset pricing around volatility, the authors build on a price–volume relationship inspired by fluid dynamics, combined with a white-noise assumption for the price rate of change, which is empirically validated using market data.

The study suggests that trading volume may serve as a more fundamental state variable than volatility in certain pricing contexts.

Want more research breakdowns like this? Subscribe for weekly insights.