Dynamic Volume-Return Relation of Individual Stocks
AbstractWe 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.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8312.
Date of creation: May 2001
Date of revision:
Publication status: published as Llorente, G., R. Michaely, G. Saar and J. Wang. "Dynamic Volume-Return Relation Of Individual Stocks," Review of Financial Studies, 2002, v15(4), 1005-1047.
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
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Other versions of this item:
- Guillermo Llorente & Roni Michaely & Gideon Saar & Jiang Wang, 2002. "Dynamic Volume-Return Relation of Individual Stocks," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 15(4), pages 1005-1047.
- G1 - Financial Economics - - General Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-06-08 (All new papers)
- NEP-FIN-2001-06-08 (Finance)
- NEP-FMK-2001-06-08 (Financial Markets)
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