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Trading volume and serial correlation in stock returns: a threshold regression approach

Author

Listed:
  • Shoko Morimoto

    (Graduate School of Economics, Osaka University)

  • Mototsugu Shintani

    () (Department of Economics, Vanderbilt University)

Abstract

We extend the analysis of Campbell et al. (1993) on the relationship between the first-order daily stock return autocorrelation and stock market trading volume by allowing abrupt and smooth transition structures using lagged stock returns as a transition variable. Using U.S. stock market data, we find the evidence supporting the nonlinear relationship characterized by a stronger return reversal effect on a high-volume day combined with low lagged stock returns.

Suggested Citation

  • Shoko Morimoto & Mototsugu Shintani, 2010. "Trading volume and serial correlation in stock returns: a threshold regression approach," Discussion Papers in Economics and Business 10-28, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  • Handle: RePEc:osk:wpaper:1028
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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1028.pdf
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    More about this item

    Keywords

    TAR; STAR; Stock return autocorrelation; Trading volume;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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