The Real Side of the High-Volume Return Premium

Ron Kaniel, Doron Israeli and Suhas A. Sridharan

No 14587, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Prior literature demonstrates that an 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, nor 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)
JEL-codes: E22 G12 G14 M41 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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Journal Article: The Real Side of the High-Volume Return Premium (2022)
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