High Aggregate Volume Return Premium

56 Pages Posted: 21 Nov 2017 Last revised: 6 Feb 2020

See all articles by Ferhat Akbas

Ferhat Akbas

University of Illinois at Chicago

Egemen Genc

University of Illinois at Chicago

Chao Jiang

University of South Carolina - Department of Finance

Paul D. Koch

Iowa State University - Finance Department; Iowa State University - Finance Department

Date Written: February 3, 2020

Abstract

Unusually high aggregate stock trading volume in one week predicts higher excess market returns in the following week, especially when accompanied by high market volatility. This predictive relation is robust across alternative measures of aggregate trading volume. In out-of-sample forecasting tests, unusually high aggregate volume outperforms a host of other variables that have been shown to forecast the equity premium. Our evidence is most consistent with a risk premium associated with shocks to market-wide disagreement among market participants. Return autocorrelations, visibility effects, and market sentiment do not explain our findings.

Keywords: Disagreement, abnormal trading volume, asset prices, equity risk premium, volatility, return predictability

JEL Classification: G12, G15, G17

Suggested Citation

Akbas, Ferhat and Genc, Egemen and Jiang, Chao and Koch, Paul D., High Aggregate Volume Return Premium (February 3, 2020). Available at SSRN: https://ssrn.com/abstract=3074131 or http://dx.doi.org/10.2139/ssrn.3074131

Ferhat Akbas

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60076
United States

Egemen Genc

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
United States

Chao Jiang (Contact Author)

University of South Carolina - Department of Finance ( email )

1014 Greene Street
Columbia, SC 29208
United States

Paul D. Koch

Iowa State University - Finance Department

Ivy College of Business
Ames, IA 50011
United States
5152942491 (Phone)

HOME PAGE: http://https://www.business.iastate.edu/directory/pkoch/

Iowa State University - Finance Department

Ames, IA 50011-2063
United States
5152942491 (Phone)

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