Trading Volume, Heterogeneous Expectations, and Earnings Announcements

Thanh Huong Dinh and Jean-François Gajewski

Journal of Behavioral Finance, 2015, vol. 16, issue 4, 327-343

Abstract: Using the experimental method, this paper provides evidence that the dispersion of beliefs is the main driver behind trading volume. However, in contrast with existing literature, we show that the relationship between trading volume and heterogeneity of expectations is more concave than linear. We study investors' reactions in terms of trading volume to the announcement of earnings. The experiment shows that heterogeneity of expectations does not decrease when investors have more information about the final results. This heterogeneity is also the main factor behind transactions in our experimental asset markets. However, too large a dispersion in expectations dissuades investors from trading.

Date: 2015
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DOI: 10.1080/15427560.2015.1095753

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