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| Author: | Llorente, G. |
| Title: | Dynamic Volume-Return Relation of Individual Stocks |
| Journal: | Review of Financial Studies
2002 : FALL, VOL. 15:4, p. 1005-1048 |
| Index terms: | STOCKS MODELS INVESTORS INFORMATION |
| Language: | eng |
| Abstract: | The authors examine the dynamic relation between return and volume of individual stocks. Using a simple model in which investors trade to share risk or speculate on private information, the authors show that returns generated by risk-sharing trades tend to reverse themselves, while returns generated by speculative trades tend to continue themselves. The authors test this theoretical prediction by analyzing the relation between daily volume and first- order return autocorrelation for individual stocks listed on the NYSE and AMEX. The authors find that the cross- sectional variation in the relation between volume and return autocorrelation is related to the extent of informed trading in a manner consistent with the theoretical prediction. |
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