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The Relation Between Trading Volume Concentration and Stock Returns

Author

Listed:
  • Chen-Chang Lo

    (Department of International Finance, I-Shou University, Taiwan)

  • Yaling Lin

    (Department of Finance, I-Shou University, Taiwan)

  • Jiann-Lin Kuo

    (Department of Finance, I-Shou University, Taiwan)

  • Yi Ting Wen

    (Department of Finance, I-Shou University, Taiwan)

Abstract

The Taiwan Stock Exchange discloses data on daily trading volume across brokerage firms for each listed stock. Market practitioners suggest that the concentration of trading volume contains information on the trading behaviors of big players. We use the Gini Coefficient to measure the degree of concentration, upon which a trading strategy is proposed. We conduct an event study to examine whether such a strategy will yield abnormal returns. Our sample contains 375 listed companies with events identified during the sample period from February 2020 to August 2020. The empirical results show that the trading signal based on the Gini coefficient is informative and that most of the average abnormal returns after the event date are significantly positive with the cumulative average abnormal returns increasing almost monotonically up to the end day of the event window. Consistent with prior studies in which different measures of concentration are utilized, our findings provide additional evidence that the Gini Coefficient could help investors to develop profitable stock selection and market timing strategies.

Suggested Citation

  • Chen-Chang Lo & Yaling Lin & Jiann-Lin Kuo & Yi Ting Wen, 2021. "The Relation Between Trading Volume Concentration and Stock Returns," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 7(3), pages 82-89, 09-2021.
    • Handle: RePEc:arp:ijefrr:2021:p:82-89
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    References listed on IDEAS

    as
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