Trading volume, return variability and short-term momentum

Umut Gökçen, Thierry Post

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

We propose short-term averages of daily stock-level trading volume and return variability as proxies for latent corporate news flow. Conditioning momentum strategies on these two proxies give a significant boost to winner-minus-loser alphas. Regardless of the portfolio formation and holding periods, price drift is larger after elevated levels of volume and variability, supporting the view that prices underreact to news. This pattern is not driven by micro-cap stocks and it is robust to corrections for systematic risk factors and stock characteristics such as liquidity and credit quality.

Original languageEnglish
Pages (from-to)231-249
JournalEuropean Journal of Finance
Volume24
DOIs
Publication statusPublished - 2018
Externally publishedYes

Keywords

  • latent news flow
  • mixture-of-distributions hypothesis
  • momentum
  • underreaction to news
  • variability
  • volume

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (miscellaneous)

Fingerprint Dive into the research topics of 'Trading volume, return variability and short-term momentum'. Together they form a unique fingerprint.

  • Cite this