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The economic and predictive value of trading volume growth: a tale of three moments

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  • Boyce Watkins

Abstract

This work studies long-horizon return predictability of volume growth realizations. High-mean volume growth is argued to reduce estimation risk and high volatility and skewness are interpreted as factors which increase estimation risk. It is found that stocks with high-mean trading volume growth during the past 12 months experience strong positive excess returns that do not reverse themselves over the next 5-years. Stocks with high volatility and skewness of excess turnover growth have negative future risk-adjusted returns which are economically significant. The conclusion is that increases in trading volume growth are predictive of future returns.

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  • Boyce Watkins, 2007. "The economic and predictive value of trading volume growth: a tale of three moments," Applied Financial Economics, Taylor & Francis Journals, vol. 17(18), pages 1489-1509.
    • Handle: RePEc:taf:apfiec:v:17:y:2007:i:18:p:1489-1509
    DOI: 10.1080/09603100600827620
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    Cited by:

    1. Bajzik, Josef, 2021. "Trading volume and stock returns: A meta-analysis," International Review of Financial Analysis, Elsevier, vol. 78(C).

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