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Corporate investment, short-term return reversal, and stock liquidity

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  • Kang, Moonsoo
  • Khaksari, S.
  • Nam, Kiseok

Abstract

This study establishes a link between corporate investment and short-term return reversal by addressing the role of corporate investment in shaping stock liquidity. We find that short-term return reversal is less pronounced for stocks with high corporate investment. Moreover, the analysis shows that corporate investment indeed attenuates the short-term return reversal effect regardless of other control variables. We argue that the current finding is attributable to the effect of corporate investment on the risk of a stock through which corporate investment improves stock liquidity and eventually leads to weaker short-term return reversal.

Suggested Citation

  • Kang, Moonsoo & Khaksari, S. & Nam, Kiseok, 2018. "Corporate investment, short-term return reversal, and stock liquidity," Journal of Financial Markets, Elsevier, vol. 39(C), pages 68-83.
    • Handle: RePEc:eee:finmar:v:39:y:2018:i:c:p:68-83
    DOI: 10.1016/j.finmar.2018.02.001
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    More about this item

    Keywords

    Corporate investment; Short-term reversal; Stock liquidity;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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