Trading Volume and Cross‐Autocorrelations in Stock Returns

2000-04-01articleThe Journal of Finance721 citationsbronze

No readable copy stored yet — this record is metadata only.

Financial Markets and Investment Strategies Financial Analysis and Corporate Governance Financial Risk and Volatility Modeling

Abstract

This paper finds that trading volume is a significant determinant of the lead-lag patterns observed in stock returns. Daily and weekly returns on high volume portfolios lead returns on low volume portfolios, controlling for firm size. Nonsynchronous trading or low volume portfolio autocorrelations cannot explain these findings. These patterns arise because returns on low volume portfolios respond more slowly to information in market returns. The speed of adjustment of individual stocks confirms these findings. Overall, the results indicate that differential speed of adjustment to information is a significant source of the cross-autocorrelation patterns in short-horizon stock returns.

Citations in this library

Stored only when both papers are in the corpus — 721 citations exist upstream.

References

1979Risk measurement when shares are subject to infrequent trading

1987The Relation Between Price Changes and Trading Volume: A Survey

1990When Are Contrarian Profits Due to Stock Market Overreaction?

1993Trading Volume and Serial Correlation in Stock Returns

1998Liquidity and stock returns: An alternative test

1992Stock Prices and Volume

1998Alternative factor specifications, security characteristics, and the cross-section of expected stock returns1We are especially grateful to Eugene Fama (a referee), an anonymous referee and Bill Schwert (the editor) for insightful and constructive suggestions. We also thank Wayne Ferson, Ken French, Will Goetzmann, Craig Holden, Ravi Jagannathan, Bob Jennings, Bruce Lehmann, Josef Lakonishok, Richard Roll, participants at the 1997 Meetings of the Western Finance Association, the 1997 UCLA/USC/UC Irvine conference, the November 1997 Asset Pricing Meeting of the National Bureau of Economic Research, the Atlanta Forum, and seminars at Columbia, Indiana, Florida, New York, Tulane, and Yale Universities; Eugene Fama and Ken French for providing part of the data used in this study; and Christoph Schenzler for excellent programming assistance. The second author acknowledges support from the Dean's Fund for Research and the Financial Markets Research Center at Vanderbilt University. We are responsible for remaining errors. This paper was formerly titled `A Re-Examination of Security Return Anomalies'.1

1984A Further Investigation of the Weekend Effect in Stock Returns

Cited by

2012Short Selling and the Price Discovery Process

2010What Does the Individual Option Volatility Smirk Tell Us About Future Equity Returns?

2013International Stock Return Predictability: What Is the Role of the United States?

2002Stock return predictability and model uncertainty

2013Forecasting Stock Returns

2010Deviations from Put-Call Parity and Stock Return Predictability

2011Does Chatter Really Matter? Dynamics of User-Generated Content and Stock Performance

2007Industry Information Diffusion and the Lead-lag Effect in Stock Returns