Trading volume, return variability and short-term momentum

Umut Gökçen, Thierry Post

Research output: Contribution to journalArticle

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

Fingerprint

Momentum
Trading volume
News
Credit
Risk factors
Conditioning
Liquidity
Systematic risk
Momentum strategies

Keywords

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

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (miscellaneous)

Cite this

Trading volume, return variability and short-term momentum. / Gökçen, Umut; Post, Thierry.

In: European Journal of Finance, Vol. 24, 2018, p. 231-249.

Research output: Contribution to journalArticle

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