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The Information Content of Abnormal Trading Volume

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  • Emanuele Bajo

Abstract

This paper investigates the way in which abnormal trading volume reveals new information to market participants. It is generally thought that trading volume is an efficient proxy for information flow and enhances the information set of investors. However, no research has related the presence of abnormal trading volume to firm characteristics, such as ownership and governance structure, which also have a theoretical link to information quality. I find strong excess returns around extreme trading levels, which are only moderately attributable to information disclosure. Moreover, these returns are not caused by liquidity fluctuations since prices do not reverse over the following period. In contrast, there is evidence of price momentum, suggesting that traders can implement successful portfolio strategies based on observation of current volumes. Copyright (c) 2010 Blackwell Publishing Ltd.

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  • Emanuele Bajo, 2010. "The Information Content of Abnormal Trading Volume," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(7-8), pages 950-978.
  • Handle: RePEc:bla:jbfnac:v:37:y:2010-07:i:7-8:p:950-978
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    References listed on IDEAS

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    Cited by:

    1. Tobias Nigbur, 2015. "Calls of convertible debt securities: no bad news at all," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 29(1), pages 61-79, February.
    2. Liu, Qingfu & Hua, Renhai & An, Yunbi, 2016. "Determinants and information content of intraday bid-ask spreads: Evidence from Chinese commodity futures markets," Pacific-Basin Finance Journal, Elsevier, vol. 38(C), pages 135-148.
    3. Sonia Sanabria, 2004. "Comportamiento De Los Precios Y Volúmenes De Negociación Ante Anuncios De Beneficios Anuales," Working Papers. Serie EC 2004-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    4. Gębka, Bartosz & Serwa, Dobromił, 2015. "The elusive nature of motives to trade: Evidence from international stock markets," International Review of Financial Analysis, Elsevier, vol. 39(C), pages 147-157.
    5. Francesco Campanella & Mario Mustilli & Eugenio D¡¯Angelo, 2016. "Efficient Market Hypothesis and Fundamental Analysis: An Empirical Test in the European Securities Market," Review of Economics & Finance, Better Advances Press, Canada, vol. 6, pages 27-42, February.
    6. Bartosz Gębka & Dobromił Serwa, 2012. "Liquidity needs, private information, feedback trading: verifying motives to trade," NBP Working Papers 119, Narodowy Bank Polski, Economic Research Department.
    7. Elshandidy, Tamer & Fraser, Ian & Hussainey, Khaled, 2013. "Aggregated, voluntary, and mandatory risk disclosure incentives: Evidence from UK FTSE all-share companies," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 320-333.
    8. Emna JABALLAH & Wided YOUSFI & Mohamed Ali ZARAI, 2014. "Quality of financial reports: Evidence from the Tunisian firms," E3 Journal of Business Management and Economics., E3 Journals, vol. 5(2), pages 030-038.

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