Dynamic Volume-Return Relation of Individual Stocks
We examine the dynamic relation between return and volume of individual stocks. Using a simple model in which investors trade to share risk or speculate on private information, we show that returns generated by risk-sharing trades tend to reverse themselves, while returns generated by speculative trades tend to continue themselves. We test this theoretical prediction by analyzing the relation between daily volume and first-order return autocorrelation for individual stocks listed on the NYSE and AMEX. We find that the cross-sectional variation in the relation between volume and return autocorrelation is related to the extent of informed trading in a manner consistent with the theoretical prediction. Copyright 2002, Oxford University Press.
Year of publication: |
2002
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Authors: | Llorente, Guillermo ; Michaely, Roni ; Saar, Gideon ; Wang, Jiang |
Published in: |
Review of Financial Studies. - Society for Financial Studies - SFS. - Vol. 15.2002, 4, p. 1005-1047
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Publisher: |
Society for Financial Studies - SFS |
Saved in:
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