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