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Persistence of the Dow Jones Index on Rising Volume

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This paper documents a relation between the persistence of stock returns for a large firm index and trading volume. Previous results on the negative relation between volume and persistence are replicated, but a second effect is discovered. Persistence is directly related to the current rate of change of volume. Also, this effect appears much stronger for positive returns than negative returns. Various specifications are tested to explore the structure of this phenomenon. Finally, individual firm returns are used showing that much of the correlation is coming from cross firm effects involving leads and lags. Some weak evidence is presented showing that lower beta firms are more likely to lead the overall index movements.

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  • Blake LeBaron, "undated". "Persistence of the Dow Jones Index on Rising Volume," Working papers _006, University of Wisconsin - Madison.
  • Handle: RePEc:wop:wimahp:_006
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    File URL: http://www.econ.wisc.edu/~blake/papers/ssri9201.ps
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    Cited by:

    1. Bertrand Maillet & Thierry Michel, 2000. "Further insights on the puzzle of technical analysis profitability," The European Journal of Finance, Taylor & Francis Journals, vol. 6(2), pages 196-224.
    2. Lin, Wen-Ling, 1995. "Market closure and predictability of intradaily stock returns in the United States and Japan," Journal of Empirical Finance, Elsevier, vol. 2(1), pages 19-44, March.
    3. Covrig, Vicentiu & Ng, Lilian, 2004. "Volume autocorrelation, information, and investor trading," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2155-2174, September.
    4. Rashid, Abdul, 2007. "Stock prices and trading volume: An assessment for linear and nonlinear Granger causality," Journal of Asian Economics, Elsevier, vol. 18(4), pages 595-612, August.
    5. Wang, Jiang, 1994. "A Model of Competitive Stock Trading Volume," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 127-168, February.
    6. He, Hua & Wang, Jiang, 1995. "Differential Information and Dynamic Behavior of Stock Trading Volume," Review of Financial Studies, Society for Financial Studies, vol. 8(4), pages 919-972.
    7. Andrew W. Lo & Jiang Wang, 2006. "Trading Volume: Implications of an Intertemporal Capital Asset Pricing Model," Journal of Finance, American Finance Association, vol. 61(6), pages 2805-2840, December.
    8. repec:nbp:nbpbik:v:48:y:2017:i:4:p:375-402 is not listed on IDEAS
    9. Darolles, Serge & Fol, Gaëlle Le & Mero, Gulten, 2015. "Measuring the liquidity part of volume," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 92-105.
    10. Guillermo Llorente & Roni Michaely & Gideon Saar & Jiang Wang, 2002. "Dynamic Volume-Return Relation of Individual Stocks," Review of Financial Studies, Society for Financial Studies, vol. 15(4), pages 1005-1047.
    11. Tauchen, George & Zhang, Harold & Liu, Ming, 1996. "Volume, volatility, and leverage: A dynamic analysis," Journal of Econometrics, Elsevier, vol. 74(1), pages 177-208, September.
    12. Eric Ghysels & João Pereira, 2003. "On Portfolio Choice, Liquidity, and Short Selling: A Nonparametric Investigation," CIRANO Working Papers 2003s-27, CIRANO.

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