The High-Volume Return Premium: Does it Exist in the Chinese Stock Market?

34 Pages Posted: 10 Feb 2016 Last revised: 17 Feb 2021

See all articles by Peipei Wang

Peipei Wang

Deakin University

Yuanji Wen

The University of Western Australia - Department of Accounting and Finance

Harminder Singh

Deakin University - School of Accounting, Economics and Finance

Date Written: October 5, 2017

Abstract

In this paper we examine the information content of extreme trading activity in the Chinese stock market. We find that zero-investment portfolios that are constructed by buying high-volume and selling low-volume stocks do not generate positive returns (high-volume return premium), which is apparent in developed markets. In contrast, we find that there is a high-volume return discount in speculative stocks (i.e., small-cap stocks, stocks with low institutional ownership) and in stocks with low analyst-coverage. These stocks tend to have a high degree of over-valuation in the short term followed by a relatively low return. In support, we find a larger discount in the winners group than in the losers group.

Keywords: return premium, volume shock, Chinese stock market, speculation

JEL Classification: G12, G14

Suggested Citation

Wang, Peipei and Wen, Yuanji and Singh, Harminder, The High-Volume Return Premium: Does it Exist in the Chinese Stock Market? (October 5, 2017). Pacific-Basin Finance Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2730453

Peipei Wang

Deakin University ( email )

75 Pigdons Road
Victoria, Victoria 3216
Australia
61-03-92446906 (Phone)

Yuanji Wen (Contact Author)

The University of Western Australia - Department of Accounting and Finance ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Harminder Singh

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

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