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Trading Volume, Heterogeneous Expectations, and Earnings Announcements

Author

Listed:
  • Thanh Huong Dinh
  • Jean-François Gajewski

    (Laboratoire de Recherche Magellan - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon - Institut d'Administration des Entreprises (IAE) - Lyon)

Abstract

Using the experimental method, this paper provides evidence that the dispersion of beliefs is the main driver behind trading volume. However, in contrast with existing literature, we show that the relationship between trading volume and heterogeneity of expectations is more concave than linear. We study investors' reactions in terms of trading volume to the announcement of earnings. The experiment shows that heterogeneity of expectations does not decrease when investors have more information about the final results. This heterogeneity is also the main factor behind transactions in our experimental asset markets. However, too large a dispersion in expectations dissuades investors from trading.

Suggested Citation

  • Thanh Huong Dinh & Jean-François Gajewski, 2015. "Trading Volume, Heterogeneous Expectations, and Earnings Announcements," Post-Print hal-04131383, HAL.
    • Handle: RePEc:hal:journl:hal-04131383
    DOI: 10.1080/15427560.2015.1095753
    as

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