Turning Over Turnover

Posted: 26 Jun 2008

See all articles by Martijn Cremers

Martijn Cremers

University of Notre Dame; ECGI

Jianping Mei

New York University (NYU) - Department of Finance

Multiple version iconThere are 4 versions of this paper

Date Written: November 2007


This article applies the methodology of Bai and Ng (2002, 2004) for decomposing panel data into systematic and idiosyncratic components to both stock returns and turnover panels. This approach works well for both returns and turnover, despite the presence of severe heteroscedasticity and nonstationarity of individual stocks' turnover. We test the mutual fund separation model of Lo and Wang (2000). Trading due to systematic risk in returns can account for 66% of systematic turnover. Thus, portfolio rebalancing due to systematic risk is a very important motive for stock trading. Finally, several common turnover measures may understate the impact of stock trading.

JEL Classification: G12

Suggested Citation

Cremers, K. J. Martijn and Mei, Jianping, Turning Over Turnover (November 2007). The Review of Financial Studies, Vol. 20, Issue 6, pp. 1749-1782, 2007, Available at SSRN: https://ssrn.com/abstract=1151575 or http://dx.doi.org/10.1093/rfs/hhm038

K. J. Martijn Cremers (Contact Author)

University of Notre Dame ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Jianping Mei

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0354 (Phone)
212-995-4221 (Fax)

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