Economics at your fingertips  

Volume shocks and stock returns: An alternative test

Angel Zhong, Daniel Chai, Bob Li and Mardy Chiah

Pacific-Basin Finance Journal, 2018, vol. 48, issue C, 1-16

Abstract: Using an alternative measure for abnormal trading volume, this article examines the role of volume shock in the generation of stock returns. We find a strong high volume effect at both portfolio and individual stock levels. A strategy that buys stocks experiencing high volume shocks and sells stocks experiencing low volume shocks generates positive returns up to 12 months after formation. The effect is robust after controlling for other stock characteristics that are known to affect stock returns. Our results show that trading volume becomes relatively higher after high volume shocks. Moreover, the relation between volume shocks and stock returns is stronger for stocks that previously failed to catch investors' attention. This finding is consistent with the view that abnormal trading volume proxies for unobserved attention-grabbing events. However, we find no evidence that volume shocks are priced.

Keywords: Trading volume; Volume shocks; Asset pricing; Attention (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.pacfin.2018.01.001

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2023-03-26
Handle: RePEc:eee:pacfin:v:48:y:2018:i:c:p:1-16