Trading Volume and Short-Horizon Price Pattern : A Cross-Country Test on Three Behavioral Models

We provide a cross-country test on three theoretical models that might explain the relation between trading volume and short-horizon price pattern that gives rise to contrarian/momentum profits. Based on weekly returns of seven Pacific-Basin countries, including Japan, Taiwan, Korea, Hong Kong, Malaysia, Thailand, and Singapore during the period of 1990 to 2000, we find substantial evidence that supports the Lee and Swaminathan (2000) Momentum Life Cycle theory. On the other hand, the behavioural models by Daniel, Hirshleifer, and Subrahmanyam (1998) and Hong and Stein (1999) explain less of the relations found in these countries