Online Trading White Papers
The High Volume Return Premium
Overview The idea that extreme trading activity (as measured by trading volume) contains information about the future evolution of stock prices is investigated. We find that stocks experiencing unusually high (low) trading volume over a period of one day to a week tend to appreciate (depreciate) over the course of the following month. This effect is consistent across firm sizes, portfolio formation strategies, and volume measures. Surprisingly, the effect is even stronger when the unusually high or low trading activity is not accompanied by extreme returns, and appears to be permanent.Previous studies have documented the positive contemporaneous correlation between a stock's trading volume and its return, and the autocorrelation in returns. This whitepaper shows that profitable trading strategies can be implemented to take advantage of the information contained in trading volume.
| Publisher | University of Pennsylvania | File Format | PDF, requires Acrobat Rdr 5 |
|---|---|---|---|
| Date Published | January 1999 | Downloads | 3 |
| Format | White Papers | ||
| Topics | |||
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