The Real Side of the High-Volume Return Premium

60 Pages Posted: 1 Feb 2017 Last revised: 25 Dec 2018

See all articles by Doron Israeli

Doron Israeli

IDC Herzliya - Arison School of Business

Ron Kaniel

University of Rochester - Simon Business School; CEPR

Suhas A. Sridharan

Emory University - Goizueta Business School

Date Written: December 25, 2018

Abstract

Prior literature demonstrates that an increased trading activity of a firm’s stock, over short periods of time such as a week, is associated with abnormal future stock returns (the high-volume return premium). In this study, we investigate whether the increased trading activity entails real actions at the corporate level. We document a positive relation between abnormal trading volume, future investment expenditures, and financing cash flows. This positive relation is not subsumed by the arrival of investment-related news or other corporate disclosures, nor by subsequent earnings information, and is concentrated among firms with high financial constraints and firms with lower levels of investor recognition.

Keywords: Trading volume; Corporate investment; Financing cash flows; Investor recognition

JEL Classification: E22, G12, G14, M41

Suggested Citation

Israeli, Doron and Kaniel, Ron and Sridharan, Suhas A., The Real Side of the High-Volume Return Premium (December 25, 2018). Simon Business School Working Paper No. FR 17-07. Available at SSRN: https://ssrn.com/abstract=2909494 or http://dx.doi.org/10.2139/ssrn.2909494

Doron Israeli (Contact Author)

IDC Herzliya - Arison School of Business ( email )

P.O. Box 167
Herzliya, 46150
Israel
+972 9 952 7673 (Phone)

Ron Kaniel

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

HOME PAGE: http://rkaniel.simon.rochester.edu

CEPR ( email )

London
United Kingdom

Suhas A. Sridharan

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

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