TY - JOUR
T1 - A Dynamic Volume-Return Relation and Investors' Positive Feedback Trading
AU - Miwa, Kotaro
AU - Ueda, Kazuhiro
N1 - Copyright:
Copyright 2011 Elsevier B.V., All rights reserved.
PY - 2011/9
Y1 - 2011/9
N2 - With individual stocks, a larger increase in trading volume indicates a stronger short-term return persistence. A reason for this short-horizon 'volume-return relation' is that it can signal the existence of fundamental news, which can be gradually incorporated into stock price. In this study, we present another plausible explanation by considering investors' short-term positive feedback trading. First, through empirical analysis, we show that the volume-return relation remains strong among stocks for which there is little fundamental news. Through a model-based analysis, we demonstrate that positive feedback trading can cause this relation even when there is no news. Our findings raise the possibility that the short-horizon volume-return relation is also caused by short-term positive feedback trading.
AB - With individual stocks, a larger increase in trading volume indicates a stronger short-term return persistence. A reason for this short-horizon 'volume-return relation' is that it can signal the existence of fundamental news, which can be gradually incorporated into stock price. In this study, we present another plausible explanation by considering investors' short-term positive feedback trading. First, through empirical analysis, we show that the volume-return relation remains strong among stocks for which there is little fundamental news. Through a model-based analysis, we demonstrate that positive feedback trading can cause this relation even when there is no news. Our findings raise the possibility that the short-horizon volume-return relation is also caused by short-term positive feedback trading.
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U2 - 10.1111/j.1468-2443.2010.01124.x
DO - 10.1111/j.1468-2443.2010.01124.x
M3 - Article
AN - SCOPUS:80052587071
VL - 11
SP - 325
EP - 351
JO - International Review of Finance
JF - International Review of Finance
SN - 1369-412X
IS - 3
ER -