Trading Volume and Serial Correlation in Stock Returns

John Campbell, Sanford Grossman and Jiang Wang

No 4193, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates the relationship between stock market trading volume and the autocorrelations of daily stock index returns. The paper finds that stock return autocorrelations tend to decline with trading volume. The paper explains this phenomenon using a model in which risk-averse "market makers" accommodate buying or selling pressure from "liquidity" or "non-informational" traders. Changing expected stock returns reward market makers for playing this role. The model implies that a stock price decline on a high-volume day is more likely than a stock price decline on a low-volume day to be associated with an increase in the expected stock return.

Date: 1992-10
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published as Quarterly Journal of Economics, vol cviii (4), November 1993, pp. 905-939

Downloads: (external link)
http://www.nber.org/papers/w4193.pdf (application/pdf)

Related works:
Journal Article: Trading Volume and Serial Correlation in Stock Returns (1993)
Working Paper: Trading Volume and Serial Correlation in Stock Returns (1993)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:4193

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4193

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().