Speculative trading, stock returns and asset pricing anomalies

Teng Zhang, Jiaqi Li and Zhiwei Xu

Emerging Markets Review, 2024, vol. 61, issue C

Abstract: We propose a novel firm-level measure of speculative trading (SPT) for the Chinese stock market. Based on prior studies identifying differences of opinion as the dominant driver of speculative trading, we isolate the trading volume driven by differences of opinion from total trading volume as the speculative trading measure. We verify that SPT effectively reflects speculative trading and significantly and negatively predicts future returns. More importantly, SPT contains incremental information relative to the other speculative trading proxies. Using SPT, we further find that speculative trading plays a key role in explaining and driving the anomaly returns in the Chinese market.

Keywords: Speculation trading; Differences of opinion; Partial least squares; Stock returns (search for similar items in EconPapers)
JEL-codes: C21 G12 G14 G40 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:61:y:2024:i:c:s1566014124000608

DOI: 10.1016/j.ememar.2024.101165

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