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Trading volume and return reversals

Greg Duffee

No 192, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper tests whether the magnitude of the serial correlation of monthly stock returns varies with trading volume. In both the 1915-1945 and 1946-1989 periods, it finds a statistically significant relationship between NYSE volume shocks and return reversals. The point estimates suggest that if month \\"t\\" has a one-standard-deviations shock to trading volume, an additional 40 to 50 percent of month t's stock return is eventually reversed. Additional results indicate that the volume shocks are not just a proxy for previously known predictors of aggregate stock returns such as the dividend/price ratio, the term structure, and the default premium.

Keywords: Stock; market (search for similar items in EconPapers)
Date: 1992, Revised 1992
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:192

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