The Real Side of the High-Volume Return Premium

Doron Israeli (), Ron Kaniel and Suhas A. Sridharan ()
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Doron Israeli: Arison School of Business, Interdisciplinary Center (IDC) Herzliya, Herzliya 4610101, Israel; Graduate School of Business, Nazarbayev University, Nur-Sultan City 010000, Republic of Kazakhstan
Suhas A. Sridharan: Goizueta Business School, Emory University, Atlanta, Georgia 30322

Management Science, 2022, vol. 68, issue 2, 1426-1449

Abstract: Prior literature demonstrates that increased trading activity of a firm’s stock is associated with abnormal future stock returns (the high-volume return premium ) and interprets this phenomenon as evidence that increased visibility generates reductions in cost of capital. Motivated by this interpretation, we investigate whether increased trading activity entails changes in real corporate actions. We document a positive relation between abnormal trading volume, future investment expenditures, and financing cash flows. This positive relation is not subsumed by the arrival of investment-related news or other corporate disclosures or by subsequent earnings information and is concentrated among firms with high financial constraints and firms with lower levels of investor recognition.

Keywords: trading volume; corporate investment; financing cash flows; investor recognition (search for similar items in EconPapers)
Date: 2022
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http://dx.doi.org/10.1287/mnsc.2020.3886 (application/pdf)

Related works:
Working Paper: The Real Side of the High-Volume Return Premium (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:68:y:2022:i:2:p:1426-1449

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