Abstract: Because traditional models only capture volume-price relation under normal market condition, a regime switching Copula model is proposed to explore the tail dependence of volume-price under extreme market conditions, and it is fourd that there exist significant and asymmetric volume-price dependence at extremes for Shanghai and Shenzhen stock markets. In particular, extremely (absolute)high returns tend to be associated with extremely large trading volumes, while extremely (absolute)low returns tend not to be related to either large or small volumes. Additionally, volume-price is regime-dependent and shows obvious cyclic behavior and structure change. The structure change points correspond to the starts or ends of big market adjustments. It is also found volume-price dependence in Shanghai market is much stronger than that in Shenzhen market, but return-volume dependence has a bigger range in the regimes, however, the absolute return-volume dependence of the two market range in regimes has little difference.

Key words: volume-price relation, tail dependence, regime switching, Copula