Trading volume, anomaly returns and noise trader risk in China

Chunmao Han and Wei Zhang

Pacific-Basin Finance Journal, 2024, vol. 84, issue C

Abstract: We document trading volume's amplification effect on trading friction anomalies in the Chinese market. Unlike the uncertain role in different situations in the U.S. market, trading volume in the Chinese market represents noise trading activity/sentiment, rather than efficiency. At the market level, anomaly returns are higher during periods of higher trading activity; at the individual stock level, anomalies constructed by high-turnover stocks have higher returns. We use noise trader risk to explain the contradiction whereby trading volume does not promote efficiency in the retail investor-dominated Chinese market. Further, we propose a volume-weighted portfolio to utilize trading volume's amplification effect and liquidity property. It produces high returns with low transaction costs.

Keywords: Trading volume; Anomalies; Portfolios; Noise trader risk; Volume-weighted; Mispricing; China (search for similar items in EconPapers)
JEL-codes: G12 G14 G23 (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)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X24000325
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: https://EconPapers.repec.org/RePEc:eee:pacfin:v:84:y:2024:i:c:s0927538x24000325

DOI: 10.1016/j.pacfin.2024.102281

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 ().