Trading Volume and Serial Correlation in Stock Returns

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Trading Volume and Serial Correlation in Stock Returns

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Title: Trading Volume and Serial Correlation in Stock Returns
Author: Wang, Jiang; Grossman, Sanford; Campbell, John

Note: Order does not necessarily reflect citation order of authors.

Citation: Campbell, John Y., Sanford J. Grossman, and Jiang Wang. 1993. Trading volume and serial correlation in stock returns. Quarterly Journal of Economics 108, no. 4: 905-939.
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Abstract: This paper investigates the relationship between aggregate stock market trading volume and the serial correlation of daily stock returns. For both stock indexes and individual large stocks, the first-order daily return autocorrelation tends to decline with volume. The paper explains this phenomenon using a model in which risk-averse "market makers" accommodate buying or selling pressure from "liquidity" or "noninformational" traders. Changing expected stock returns reward market makers for playing this role. The model implies that a stock price decline on a high-volume day is more likely than a stock price decline on a low-volume day to be associated with an increase in the expected stock return.
Published Version: http://dx.doi.org/10.2307/2118454
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:3128710

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  • FAS Scholarly Articles [6868]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
 
 

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