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

Shoko Morimoto and Mototsugu Shintani
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Shoko Morimoto: Graduate School of Economics, Osaka University

No 10-28, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

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.

Keywords: TAR; STAR; Stock return autocorrelation; Trading volume (search for similar items in EconPapers)
JEL-codes: C22 G12 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2010-12
New Economics Papers: this item is included in nep-mst
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