The Relation Between Trading Volume Concentration and Stock Returns

Chen-Chang Lo, Yaling Lin, Jiann-Lin Kuo and Yi Ting Wen
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Chen-Chang Lo: Department of International Finance, I-Shou University, Taiwan
Yaling Lin: Department of Finance, I-Shou University, Taiwan
Jiann-Lin Kuo: Department of Finance, I-Shou University, Taiwan
Yi Ting Wen: Department of Finance, I-Shou University, Taiwan

International Journal of Economics and Financial Research, 2021, vol. 7, issue 3, 82-89

Abstract: The Taiwan Stock Exchange discloses data on daily trading volume across brokerage firms for each listed stock. Market practitioners suggest that the concentration of trading volume contains information on the trading behaviors of big players. We use the Gini Coefficient to measure the degree of concentration, upon which a trading strategy is proposed. We conduct an event study to examine whether such a strategy will yield abnormal returns. Our sample contains 375 listed companies with events identified during the sample period from February 2020 to August 2020. The empirical results show that the trading signal based on the Gini coefficient is informative and that most of the average abnormal returns after the event date are significantly positive with the cumulative average abnormal returns increasing almost monotonically up to the end day of the event window. Consistent with prior studies in which different measures of concentration are utilized, our findings provide additional evidence that the Gini Coefficient could help investors to develop profitable stock selection and market timing strategies.

Keywords: Trading volume concentration; Gini coefficient; Big players; Event study. (search for similar items in EconPapers)
Date: 2021
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