The Real Side of the High-Volume Return Premium
60 Pages Posted: 1 Feb 2017 Last revised: 25 Dec 2018
Date Written: December 25, 2018
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: Suggested Citation