Review of Financial Studies Vol. 15 No. 4 2002
Dynamic Volume-Return Relation of Individual Stocks
Abstract
We examine the dynamic relation between return and volume of individual stocks. Using a simple model in which investors trade to share risk or speculate on private information, we show that returns generated by risk-sharing trades tend to reverse themselves, while returns generated by speculative trades tend to continue themselves. We test this theoretical prediction by analyzing the relation between daily volume and first-order return autocorrelation for individual stocks listed on the NYSE and AMEX. We find that the cross-sectional variation in the relation between volume and return autocorrelation is related to the extent of informed trading in a manner consistent with the theoretical prediction.
- Volume
- 15
- Issue
- 4
- Pages
- 1005-1047
- Sources
- bibtex:phds-export.bib