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Trading volume, return variability and short-term momentum

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  • Umut Gökçen
  • Thierry Post

Abstract

We propose short-term averages of daily stock-level trading volume and return variability as proxies for latent corporate news flow. Conditioning momentum strategies on these two proxies give a significant boost to winner-minus-loser alphas. Regardless of the portfolio formation and holding periods, price drift is larger after elevated levels of volume and variability, supporting the view that prices underreact to news. This pattern is not driven by micro-cap stocks and it is robust to corrections for systematic risk factors and stock characteristics such as liquidity and credit quality.

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  • Umut Gökçen & Thierry Post, 2018. "Trading volume, return variability and short-term momentum," The European Journal of Finance, Taylor & Francis Journals, vol. 24(3), pages 231-249, February.
    • Handle: RePEc:taf:eurjfi:v:24:y:2018:i:3:p:231-249
    DOI: 10.1080/1351847X.2016.1256828
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    Cited by:

    1. Molintas, Dominique Trual, 2021. "Black Scholes Model," MPRA Paper 110124, University Library of Munich, Germany.

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