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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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Paper provided by University of Wisconsin - Madison in its series Working papers with number _006.

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Handle: RePEc:wop:wimahp:_006
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