Why does higher variability of trading activity predict lower expected returns?

Alexander Barinov

Journal of Banking & Finance, 2015, vol. 58, issue C, 457-470

Abstract: The paper shows that controlling for the aggregate volatility risk factor eliminates the puzzling negative relation between variability of trading activity and future abnormal returns. I find that variability of other measures of liquidity and liquidity risk is largely unrelated to expected returns. Lastly, I show that the low returns to firms with high variability of trading activity are not explained by liquidity risk or mispricing theories.

Keywords: Liquidity; Uncertainty; Liquidity risk; Turnover; Trading volume; Aggregate volatility risk (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:58:y:2015:i:c:p:457-470

DOI: 10.1016/j.jbankfin.2015.05.014

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