The High-Volume Return Premium: Does it Exist in the Chinese Stock Market?
34 Pages Posted: 10 Feb 2016 Last revised: 17 Feb 2021
Date Written: October 5, 2017
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
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