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Cumulative Volume Index – Definition

Cumulative Volume Index Definition

Cumulative volume index is a type of technical indicator on a stock chart which makes use of the advance and decline volume data (volume trends; the volume of rising stocks and the volume of falling stocks respectively) that are downloaded for the NYSE, NASDAQ, and AMEX by the Advancing-Declining-Unchanged volume. Cumulative volume index (short form; CVI) refers to the momentum index tat calculates the pattern of capital being pushed into and withdrawn from the stocks market by summing the difference between the speculated stock price and the decline in the stock price at the current total price.

A Little More on What is the Cumulative Volume Index – CVI

The Cumulative Volume Index is quite similar to the Aggregated Volume Index, but varies due to specificity. The Average Aggregated Index is broad and highlights the direction of a market or an index like the NASDAQ or the Standard and Poor (S&P) 500 Index, and its name is similar to the balance indicator. The CVI, however, focuses particularly on the number of “values” as opposed to the volume in the specified market.

CVI time intervals are best used over the price index to allows for proper explanation of its values. This should be particularly adhered to by investors, so that they don’t make the mistake of trying to understand the real number as it rarely has a use in the market movement pattern. Just like other indicators, combination is key, and thus, traders wouldn’t hesitate to mix this indicator with other technical indicators or analysis tools. When combined with other indicators, CVI can be used to identify trends and increase the chance of successful tradings.

The cumulative index has a great effect on determining that capital is an index of entry and exit point. CVI trends also affect trader’s sentiments in the market, but the degree of momentum. In a case where the CVI trend is low, traders may feel that momentum is getting weaker, thus, making a chance for a possible reversal. Also, when CVI trend is high, traders often get to believe that momentum is getting stronger ad thus, a reversal may be far from possible and it’s time to up their investments. Traders also have the opportunity of searching for convergence and divergence between the market price and the cumulative volume index trend line. The CVI value doesn’t showcase the highest and the lowest levels, thus possibly breeding a sign of a guaranteed solution to a problem at that point in the market.

References for Cumulative Volume Index




Academic Research for Cumulative Volume Index

Corporate vulnerability index as a fear gauge? Exploring the contagion effect between US and Korean markets, Kim, J. S., Ryu, D., & Seo, S. W. (2015). Journal of Derivatives, 23(1), 73. This paper uses the CVI (Corporate Vulnerability Index) that has been newly introduced to measure the individual firms’ probabilities of credit and default risks as the contagion effect evidence in the global financial markets. The authors examine how firms propagate credit risks from the United States financial market to the financial markets of Korea. The findings are that the firms propagate global financial market contagion through foreign trading channels directly instead of correlated information channels. There are a strong contagion effect and market linkage between Korean and the United States financial markets. The authors suggest applying the CVI as a trading indicator and a fear gauge.

VOLUME REACTIONS TO QUARTERLY EARNINGS ANNOUNCEMENTS–A STUDY ON BSE 500 GROUP OF COMPANIES, Banerjee, K. (2012). 42(2), 68-80. The information release has an effect on stocks volume in the market. In the market, the information process release causes a new equilibrium. It leads to a move in volume as the information release enables the old level of equilibrium to move to the new one as it strives to adjust itself to the new information. It happens if the price shift is least after the release of information. The shift in volume may be there without any considerable change in price. So, the article goes through the impacts of volume in the limelight of the information release aftermaths in the market.

Domestic financial instability and foreign reserves accumulation in China, Wang, L., & Hueng, C. J. International Finance. National financial instability raises the potential for the flight of resident-based capital from the national currency. It offers China an incentive to keep, in a short time, more foreign reserves. The authors develop a financial stress index of China on a monthly basis as a proxy for the capital flight possibility. The empirical findings are that this index is an important movements determinant of foreign reserves of China around the trend. With the help of M2 as a proxy for national financial instability as mentioned in previous literature is not a valid policy for China. The role of national financial conditions should be considered.

Predicting Financial Crises: An Overview, Goldstein, M. (2005). In Early Warning Systems for Financial Crises (pp. 21-37). Palgrave Macmillan, London. The EWS (Early Warning Systems) have been developed to warn in anticipation of the financial crisis in emerging economies. The objective of this paper is to review the advancement in the application of EWS in case of a crisis of currency and banking. Developing an EWM (Early Warning Model) is important because of 2 reasons: (1) the currency and banking crisis is very expensive for the countries where they start and (2) also for other countries that are influenced by the original crisis spillover.

Cross-listing and subsequent delisting in foreign markets, You, L., Parhizgari, A. M., & Srivastava, S. (2012). Journal of Empirical Finance, 19(2), 200-216. This paper investigates the delisting consequences in terms of risk, price, liquidity and volume. The authors directly compare the performance of firms because of foreign cross-listing with its subsequent delisting. The findings are that there is a positive effect of cross-listing and negative impact of delisting on the stock price. In the long-run, both of these effects dissipate. There are no considerable changes for any of these cases in the market risk. The delisting and foreign cross-listing are linked to rising and declining the trading volume of long-term respectively. The bonding hypothesis cannot elaborate on the delisting loss and the listing premium.


Direct tests of index arbitrage models, Neal, R. (1996). Journal of Financial and Quantitative Analysis, 31(4), 541-562. Previous examinations of stock IAM (Index Trade Models) reject their no-arbitrage constraint. This article analyzes actual arbitrage trades of S&P 500 and relates them directly to the IAM (Index Arbitrage Models) predictions. This analysis suggests that (1) rules of short-sale do not influence the cash-futures mispricing, (2) the arbitrage funds’ opportunity cost supersedes the Treasury bill rate, (3) price discrepancy, which arbitrage trades capture, is small on average. The findings are that the models’ tests favour the arbitrage model version which integrates an option of Early liquidation. However, these models can provide very little details of arbitrage trades, surprisingly.

Time variation of liquidity in the private real estate market: An empirical investigation, Clayton, J., MacKinnon, G., & Peng, L. (2008). Journal of Real Estate Research, 30(2), 125-160. This research examines competing details of time variation in the liquidity of private market of real estate as presented by Fisher in 2003. First, the sellers base their value assessments on signals observations from the market but the noise presence shows that a change in signal is not completely reflected in updated value assessments of sellers. Secondly, Novy and Krainer introduce no-transaction opportunity cost and waiting option value applying optimal valuation strategy of sellers. Thirdly, the authors associate market liquidity with investors sentiment because of over-optimistic traders. The empirical findings are consistent with the optimal valuation models with rational updating.

Assessing Financial Vulnerability in Emerging Economies: A Summary of Empirical Results, Goldstein, M., Kaminsky, G., & Reinhart, C. (2000). This research identifies main empirical regularities in the substantial increase to currency and banking crisis which will, at an early stage, make the participants of the private market and officials able to specify vulnerability to the financial crisis. In turn, it makes easier to take correct policy actions preventing the crises from taking place in actual. Interest in recognizing EWI (Early Warning Indicators) has increased rapidly because of 2 factors. First, the currency and banking crisis is very expensive for the countries where they start and (2) also for other countries that are influenced by the original crisis spillover. This paper also finds other EWI performing better.

Financing decision: A vital key to explaining small and medium enterprises (SMEs) financial performance, Katerega, Y. N., Ngoma, M., Masaba, A. K., Nangoli, S., & Waswa, Y. (2015). This paper conducts a cross-sectional survey taking a sample size of three hundred and forty-one Small & Medium Enterprises in the categories of manufacturing, general merchandise, hotels & restaurants and supermarkets. The authors use simple random sampling from 3274 firms total population as an analysis unit. The senior staff and owner are the inquiry unit. Target is 1 respondent per firm. The findings are that there is a positive relationship between the financial performance of SMEs and their financing decision with the implication that financing decision acts as an important predictor of SMEs financial performance in Uganda. The need to pay heed to interest rates and professionalism for better performance.

Trading activity in the equity market and its contingent claims: An empirical investigation, Roll, R., Schwartz, E., & Subrahmanyam, A. (2014). Journal of Empirical Finance, 28, 13-35. This paper goes through the trading activity time-series in the index of S&P 500 cash and its derivatives (E-mini futures and legacy contracts, the ETF and options) and with the macroeconomy, take their dynamic relation into consideration over above three thousand trading days in 1997 to 2009. The trend of legacy futures volume is down while the trend of other series is upward. In contingent claims, the absolute and signed trading activity predicts shifts in total state variables, for example, the credit spreads, the term, short interest rate and absolute and signed returns around main macroeconomic announcements.

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