Abstract

http://ssrn.com/abstract=1141940
 
 

Citations



 


 



Volume and Price Patterns Around a Stock's 52-Week Highs and Lows: Theory and Evidence


Steven J. Huddart


Pennsylvania State University, University Park - Department of Accounting

Mark H. Lang


University of North Carolina at Chapel Hill

Michelle Yetman


University of California, Davis - Graduate School of Management


Management Science, Forthcoming

Abstract:     
We provide large sample evidence that past price extremes influence investors' trading decisions. Volume is strikingly higher, in both economic and statistical terms, when the stock price crosses either the upper or lower limit of its past trading range. This increase in volume is more pronounced the longer the time since the stock price last achieved the price extreme, the smaller the firm, the higher the individual investor interest in the stock, and the greater the ambiguity regarding valuation. These results are robust across model specifications and controls for past returns and news arrival. Volume spikes when price crosses either the upper or lower limit of the past trading range, then gradually subsides. After either event, returns are reliably positive and, among small investors, trades classified as buyer-initiated are elevated. Overall, results are more consistent with bounded rationality - specifically, the attention hypothesis posited by Barber and Odean (2008) - than with other candidate explanations.

Keywords: decision analysis, prospect theory, value function, reference point, behavioral finance

JEL Classification: C93, D70, D81, G12, G14

Accepted Paper Series


Not Available For Download

Date posted: September 11, 2008 ; Last revised: September 19, 2012

Suggested Citation

Huddart, Steven J. and Lang, Mark H. and Yetman, Michelle, Volume and Price Patterns Around a Stock's 52-Week Highs and Lows: Theory and Evidence. Management Science, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1141940 or http://dx.doi.org/10.2139/ssrn.353749

Contact Information

Steven J. Huddart (Contact Author)
Pennsylvania State University, University Park - Department of Accounting ( email )
University Park, PA 16802-3603
United States
814-865-3271 (Phone)
814-863-8393 (Fax)
HOME PAGE: http://www.personal.psu.edu/sjh11
Mark H. Lang
University of North Carolina at Chapel Hill ( email )
Kenan-Flagler Business School
McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-1644 (Phone)
919-962-4727 (Fax)

Michelle Yetman
University of California, Davis - Graduate School of Management ( email )
128 AOB IV
One Shields Avenue
Davis, CA 95616
United States
530-754-7808 (Phone)
530-752-2924 (Fax)
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