Abstract
It is popular among technical analysts to use high trading volume as a positive selection or filter criteria. Yet the finding in the finance literature are not clear on the predictive validity or even the direction of the impact of trading volume on stock returns. One stream of finance research finds that high changes in trading volume are associated with information asymmetry or differences in beliefs between traders, suggesting stock price reversals and return variances are higher with high trading volume. A second stream of research finds that high trading volume is attributed to informed trading, suggesting stock price reversals and return variances are lower with high trading volume. A third stream of research, modern portfolio theory, rejects the predictive validity of using past information. In this study, an alternative hypothesis is developed using an intuitive market demand and supply model, supporting the hypothesis is developed using an intuitive market demand and supply model, supporting the hypothesis that large price reactions coupled with normal trading volume are less likely to be reversed and are more stable than in the case of high trading volume. These hypothesizes are tested empirically and have important implications for investment analysts, and the controversies surrounding the means of trading volume.
Publication Date
2004
Document Type
Article
Department, Program, or Center
Accounting (SCB)
Recommended Citation
Gold, Steven, "Price-volume relationships and stock returns" (2004). Journal of Accounting and Finance Research, 85-94. Accessed from
https://repository.rit.edu/article/295
Campus
RIT – Main Campus
Comments
Note: imported from RIT’s Digital Media Library running on DSpace to RIT Scholar Works in February 2014.