Salience theory in price and trading volume: Evidence from China

Kaisi Sun, Hui Wang and Yifeng Zhu

Journal of Empirical Finance, 2023, vol. 70, issue C, 38-61

Abstract: This paper not only confirms the negative predictive power of a stock’s salient returns, but also reveals the incremental predictability of its salient trading volumes on expected returns in the Chinese stock market. Aside from the fact that the salient volume effect is stronger when investor disagreement is higher, both negative salience effects are insensitive to stock capital states (gain or loss), lottery demand, short-term reversal, investor sentiment, and attention-grabbing news or events. Salience-induced price pressure (order imbalance) analysis suggests that both institutional and retail investors can be salient thinkers regarding the stock return and trading volume.

Keywords: Salience theory; Trading volume; Equity returns; Cross-section analysis (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:70:y:2023:i:c:p:38-61

DOI: 10.1016/j.jempfin.2022.11.005

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