Trading Volume and Cross-Autocorrelations in Stock Returns

Posted: 14 Apr 1999

See all articles by Tarun Chordia

Tarun Chordia

Emory University - Department of Finance

Bhaskaran Swaminathan

LSV Asset Management

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Abstract

This paper finds that trading volume is a significant determinant of the lead-lag patterns observed in stock returns. Daily and weekly returns on high volume portfolios lead returns on low volume portfolios, controlling for firm size. Nonsynchronous trading or low volume portfolio autocorrelations cannot explain these findings. These patterns arise because returns on low volume portfolios respond more slowly to information in market returns. The speed of adjustment of individual stocks confirms these findings. Overall, the results indicate that differential speed of adjustment to information is a significant source of the cross-autocorrelation patterns in short-horizon stock returns.

JEL Classification: G12, G14

Suggested Citation

Chordia, Tarun and Swaminathan, Bhaskaran, Trading Volume and Cross-Autocorrelations in Stock Returns. Available at SSRN: https://ssrn.com/abstract=158231

Tarun Chordia (Contact Author)

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States
404-727-1620 (Phone)
404-727-5238 (Fax)

Bhaskaran Swaminathan

LSV Asset Management ( email )

155 North Wacker Drive
Chicago, IL 60606
United States

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