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Corporate Sales, Equity Trading, and Risk

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  • George W. Blazenko

Abstract

This paper proposes and investigates an explanation for a positive association between the signed value of common share returns and trading activity. The mixture of distributions model for stock returns and trading is applied with the added assumption that product sales for a firm is the directing process which generates the flow of information to equity markets. Because trading depends upon information arrival, sales and trading are positively related. Also, because contribution margin is positive, cash flows increase with sales. Dependence of both cash flows and trading on sales implies that returns and trading are also positively related. This explanation is tested in this paper.

Suggested Citation

  • George W. Blazenko, 1999. "Corporate Sales, Equity Trading, and Risk," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 26(3‐4), pages 477-504, April.
    • Handle: RePEc:bla:jbfnac:v:26:y:1999:i:3-4:p:477-504
    DOI: 10.1111/1468-5957.00264
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