Investment-Horizon Spillovers: Evidence From Decomposing Trading-Volume Variance

49 Pages Posted: 4 Jan 2015 Last revised: 2 Jun 2016

Alexander Chinco

University of Illinois at Urbana-Champaign - College of Business

Mao Ye

University of Illinois at Urbana-Champaign; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: May 13, 2016

Abstract

This paper introduces a new tool — the wavelet-variance estimator — that measures the fraction of trading activity at each investment horizon. We find substantial cross-sectional variation in horizons, even for stocks with the same volume, size, and liquidity. Moreover, the fraction of trading at the one-minute horizon is priced in monthly returns. The quintile of stocks with the highest fraction of trading at the one-minute horizon has abnormal returns that are 0.49% per month higher than the lowest quintile’s. Abnormal returns persist after controlling for liquidity, asymmetric information, and risk factors. Trading activity at one horizon can spillover and affect returns at another.

Keywords: Investment Horizon, Trading Volume, Wavelet Variance

JEL Classification: C55, C58, G12, G14

Suggested Citation

Chinco, Alexander and Ye, Mao, Investment-Horizon Spillovers: Evidence From Decomposing Trading-Volume Variance (May 13, 2016). Available at SSRN: https://ssrn.com/abstract=2544738 or http://dx.doi.org/10.2139/ssrn.2544738

Alexander Chinco (Contact Author)

University of Illinois at Urbana-Champaign - College of Business ( email )

Champaign, IL 61820
United States

Mao Ye

University of Illinois at Urbana-Champaign ( email )

406 Wohlers
1206 South 6th Street
Champaign, IL 61820
United States
2172440474 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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