Abstract

http://ssrn.com/abstract=555968
 
 

References (29)



 
 

Citations (67)



 


 



Liquidity and Autocorrelations in Individual Stock Returns


Doron Avramov


Hebrew University of Jerusalem

Tarun Chordia


Emory University - Department of Finance

Amit Goyal


University of Lausanne; Swiss Finance Institute

January 12, 2005


Abstract:     
This paper documents a strong relationship between short-run reversals and stock return illiquidity, even after controlling for trading volume. The largest reversals and the potential contrarian trading strategy profits occur in the high turnover, low liquidity stocks, as the price pressures caused by non-informational demands for immediacy are accommodated. Thus, the high frequency negative autocorrelations are more likely to result from stresses in the market for liquidity. The contrarian trading strategy profits are smaller than the likely transactions costs because the high turnover, low liquidity stocks face large transaction and market impact costs. This lack of profitability and the fact that the overall findings are consistent with rational equilibrium paradigms suggest that the violation of the efficient market hypothesis due to short-term reversals is not so egregious after all.

Number of Pages in PDF File: 41

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Date posted: June 13, 2004  

Suggested Citation

Avramov, Doron and Chordia, Tarun and Goyal, Amit, Liquidity and Autocorrelations in Individual Stock Returns (January 12, 2005). Available at SSRN: http://ssrn.com/abstract=555968 or http://dx.doi.org/10.2139/ssrn.555968

Contact Information

Doron Avramov (Contact Author)
Hebrew University of Jerusalem ( email )
Mount Scopus
Jerusalem, IL 91905
Israel
HOME PAGE: http://pluto.huji.ac.il/~davramov/
Tarun Chordia
Emory University - Department of Finance ( email )
Atlanta, GA 30322-2710
United States
404-727-1620 (Phone)
404-727-5238 (Fax)
Amit Goyal
University of Lausanne ( email )
Lausanne, 1015
Switzerland
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland
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