Trading Volume and Dispersion of Signals

75 Pages Posted: 21 Oct 2020 Last revised: 23 Aug 2021

See all articles by Nikhil Vidhani

Nikhil Vidhani

Indian Institute of Management (IIMB), Bangalore

Date Written: October 13, 2020


I propose a new measure of investor disagreement based on thirty-nine factors from the return-predicting anomaly literature. Consistent with theoretical work on volume, I show that a one standard deviation change in anomaly-based disagreement is associated with a 16.7% higher turnover in the next period. The positive and significant relationship is robust to different specifications, alternative measures of turnover and disagreement, and different periods. I document that a firm's information environment moderates the effect of disagreement on volume. Disagreement effects are stronger for firms with less public information and more complex information releases. Anomaly-based disagreement also explains analyst behavior - it is positively related to their forecast dispersion and absolute forecast errors in earnings and target prices.

Keywords: Disagreement, Return Anomalies, Trading Volume

JEL Classification: G11, G12, G14

Suggested Citation

Vidhani, Nikhil, Trading Volume and Dispersion of Signals (October 13, 2020). Available at SSRN: or

Nikhil Vidhani (Contact Author)

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
7975557296 (Phone)


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