The Information Content of Abnormal Trading Volume: An Analysis of the Italian Stock Market

29 Pages Posted: 14 Oct 2002

See all articles by Emanuele Bajo

Emanuele Bajo

University of Bologna - Department of Economics

Date Written: May 24, 2005

Abstract

The role of abnormal trading volume on the Italian Stock Market is investigated here. According to Fama's definition of Market Efficiency, no relevancy is left for trading volume. Prices fully reflect the whole firm information, so that extra trading investor's activity cannot have any informative power. In this paper, it is supposed that abnormal volumes can be considered as a signal for informed traders operating on the stocks and, as a consequence, this extra trading activity might lead to future extra-returns. Some evidence following this hypothesis is found on this paper. Abnormal trading volume, associated with no new announcements, tends to predict future abnormal returns and anticipates a new information release on stock market. A profitable possible portfolio strategy based on abnormal volume signals is also proposed and analysed.

Keywords: Insider trading, abnormal volume, event study

JEL Classification: G14

Suggested Citation

Bajo, Emanuele, The Information Content of Abnormal Trading Volume: An Analysis of the Italian Stock Market (May 24, 2005). Available at SSRN: https://ssrn.com/abstract=313582 or http://dx.doi.org/10.2139/ssrn.313582

Emanuele Bajo (Contact Author)

University of Bologna - Department of Economics ( email )

Bologna
Italy

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