  We develop a theoretical trading conditioning model subject to price
volatility and return information in terms of market psychological behavior,
based on analytical transaction volume-price probability wave distributions in
which we use transaction volume probability to describe price volatility
uncertainty and intensity. Applying the model to high frequent data test in
China stock market, we have main findings as follows: 1) there is, in general,
significant positive correlation between the rate of mean return and that of
change in trading conditioning intensity; 2) it lacks significance in spite of
positive correlation in two time intervals right before and just after bubble
crashes; and 3) it shows, particularly, significant negative correlation in a
time interval when SSE Composite Index is rising during bull market. Our model
and findings can test both disposition effect and herd behavior simultaneously,
and explain excessive trading (volume) and other anomalies in stock market.
