36 Pages Posted: 5 Jun 2016 Last revised: 25 Jul 2017
Date Written: July 21, 2017
This paper uses wavelets to decompose each stock’s trading-volume variance into frequency-specific components. We find that stocks dominated by short-run fluctuations in trading volume have abnormal returns that are 1% per month higher than otherwise similar stocks where short-run fluctuations in volume are less important — i.e., stocks with less of a short-run tilt. And, we document that a stock’s short-run tilt can change rapidly from month to month, suggesting that these abnormal returns are not due to some persistent firm characteristic that’s simultaneously adding both short-run fluctuations and long-term risk.
Keywords: Investment Horizon, Trading Volume, Wavelet Variance
JEL Classification: C55, C58, G12, G14
Suggested Citation: Suggested Citation