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Author: Guillermo Llorente
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
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Book Description
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.
Author: Guillermo Llorente
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
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Book Description
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.
Author: Louis Gagnon
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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Book Description
We examine the volume-return relationship of individual stocks around the world. We frame our empirical investigation in the context of the heterogeneous agent, rational expectations, framework proposed by Llorente, Michaely, Saar, and Wang (2002) in which investors trade to speculate on their private information or to rebalance their portfolios i.e. to share risk). Their model predicts that returns tend to continue themselves, following high volume days, when they are generated by speculative trades while returns generated by risk-sharing trades tend to reverse themselves. We test this prediction internationally by analyzing the relationship between return autocorrelation and volume using a survivorship-bias free sample of 20,305 individual stocks from forty markets around the world. We find strong support for this theoretical prediction in the vast majority of countries covered in our sample. We also find that the quality of the country's information environment influences the dynamic volume-relation of individual stocks. Our evidence shows that stocks from countries with a high-quality information environment have a higher overall propensity towards return reversals than their counterparts from countries with a poor information environment. This finding has important implications for market participants and regulatory authorities.
Author: Bartosz Gebka
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
We test the relationship between the changes in trading volume and subsequent returns for stocks traded on the Warsaw Stock Exchange (WSE). We find high volume stocks to experience strong price reversals and low volume stocks to experience weak price reversals and even continuations. Focusing on longer portfolio selection periods does not strengthen these results, and focusing on extreme change in past trading volume and past returns does so only for some high volume portfolios. The sign of volume changes is more informative than the magnitude. Our results can be interpreted as evidence of the prevalence of uninformed traders on the WSE.
Author: Guillermo Llorente
Publisher:
ISBN:
Category : Economics
Languages : en
Pages :
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Book Description
Author: Roland Mestel
Publisher:
ISBN:
Category :
Languages : en
Pages : 22
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Book Description
Several recent papers report market returns and returns of individual securities to carry informational content about future trading volume of individual stocks. In addition some authors identify significant abnormal returns of stocks that currently exhibit high volume.This paper conducts a comprehensive empirical examination of the implications of the above outlined findings for the German stock market, concretely for the most liquid stocks.We do this by applying event based methodology, which roughly means, that the stock market as a whole and individual securities themselves are clustered into states of volume and returns. For each date we identify the prevailing level of returns and volume, which allows us to categorize days into different events. Strictly peaking events in our sense are not rarely distributed over the data sample, however each day marks an event in terms of signalling a certain state of the stock market to market participants.Dependencies between market-wide/security-specific returns and volume are separately analyzed for each cluster. We examine the performance of individual stocks in each cluster and take the whole market as a benchmark, which allows to statistically check for abnormal volume and returns.Furthermore we apply vector-autoregressive models, that do not only capture dynamic structures within market data, but also allow to check for temporal causalities between volume and return. Again for each cluster, we analyze Granger-causalities between volume and market/security returns.Our preliminary results indicate only weak relations between volume and returns, however, with our methodology and possibly due to the specific data set of the most liquid German stocks, we find little statistical significance.
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Author:
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Category :
Languages : en
Pages :
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Author: Muhammad Shahbaz
Publisher: Springer Nature
ISBN: 3030790037
Category : Business & Economics
Languages : en
Pages : 245
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Book Description
This book looks into the relationship between financial development, economic growth, and the possibility of a potential capital flight in the transmission process. It also examines the important role that financial institutions, financial markets, and country-level institutional factors play in economic growth and their impact on capital flight in emerging economies. By presenting new theoretical insights and empirical country studies as well as econometric approaches, the authors focus on the relationship between financial development and economic growth with capital flight in the era of financial crisis. Therefore, this book is a must-read for researchers, scholars, and policy-makers, interested in a better understanding of economic growth and financial development of emerging economies alike.
Author: Yang Sun
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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Book Description
This study investigates the influence of information asymmetry on the cross-sectional variation of volume-return relation in the context of Australian stock market. In particular, this paper extends current research by incorporating informed traders' trade-size preference as well as its impact on the relation between information asymmetry and volume-return dynamics into analysis. After classifying trading volume according to the size of trade, we find that the dynamic volume-return relation within medium-size trades has the most significant response to the degree of information asymmetry. Our findings are consistent with the notion that informed traders concentrate in the trades of medium-size.
Author: Hanfeng Wang
Publisher:
ISBN:
Category :
Languages : en
Pages : 39
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Book Description
We find that trading volume not only contributes positively to the contemporaneous volatility, as indicated in previous literature, but also contributes negatively to the subsequent volatility. And this pattern between trading volume and volatility is consistently held among individual stocks, volume-based portfolios, size-based portfolios, and market index, and among daily data and weekly data. These empirical findings tend to support that the Information-Driven-Trade (IDT) hypothesis is more pervasive and powerful in explaining trading activities in the stock market than the Liquidity-Driven-Trade (LDT) hypothesis. Our additional tests obtain three interesting findings, 1) liquidity and the degree of information asymmetry influence the relation between volume and subsequent volatility, 2) the effect of volume on subsequent volatility and volume size have a non-linear relationship, which is consistent with Barclay and Warner (1993, JFE)'s finding, 3) the effect of volume on subsequent volatility is asymmetry when the stock price moves up and when the stock price moves down, and we attribute this asymmetry to the short-selling constraints.
Author: Yang Sun
Publisher:
ISBN:
Category :
Languages : en
Pages : 38
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Book Description
This paper investigates the influence of information asymmetry on the cross-sectional variation of volume-return relation. We find that the dynamic volume-return relation within medium-size trades has the most significant response to the degree of information asymmetry. We also show that the effect of information asymmetry on the volume-return dynamics migrates to small-size trades in recent years, especially in larger stocks. These results are consistent with the notion that informed traders prefer medium-size trades and this preference has shifted to small-size trades. Our findings highlight the importance of incorporating informed traders' trade-size decision in the examination of the dynamic return-volume relation.
