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Psychological Factors, Stock Price Paths, and Trading Volume


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
March 15, 2005

AFA 2006 Boston Meetings Paper

Abstract:     
We examine the relation between the trading volume of a stock and the past stock price trading range. Volume is strikingly higher, in both economical and statistical terms, when the current price is above (below) the previous fifty-two week high (low). Results are robust to a wide range of controls, including returns and news events. An event study shows that volume spikes in the week when price leaves the prior trading range, then gradually returns to normal levels. The results suggest that psychological factors are pervasive and strong enough to be an important determinant of equities market volume.

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

JEL Classification: C93, D70, D81, G10

working papers series


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Date posted: March 22, 2005  

Suggested Citation

Huddart, Steven J., Lang, Mark H. and Yetman, Michelle, Psychological Factors, Stock Price Paths, and Trading Volume (March 15, 2005). AFA 2006 Boston Meetings Paper. Available at SSRN: http://ssrn.com/abstract=687065 or http://dx.doi.org/10.2139/ssrn.687065

Contact Information

Steven J. Huddart
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 (Contact Author)
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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