Trading volume,return variability and short-term momentum |
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| Authors: | Umut Gökçen Thierry Post |
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| Affiliation: | 1. College of Administrative Sciences and Economics, Ko? University, Rumelifeneri Yolu, 34450 Sar?yer, Istanbul, Turkeyugokcen@ku.edu.tr;3. College of Administrative Sciences and Economics, Ko? University, Rumelifeneri Yolu, 34450 Sar?yer, Istanbul, Turkey |
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| Abstract: | We propose short-term averages of daily stock-level trading volume and return variability as proxies for latent corporate news flow. Conditioning momentum strategies on these two proxies give a significant boost to winner-minus-loser alphas. Regardless of the portfolio formation and holding periods, price drift is larger after elevated levels of volume and variability, supporting the view that prices underreact to news. This pattern is not driven by micro-cap stocks and it is robust to corrections for systematic risk factors and stock characteristics such as liquidity and credit quality. |
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| Keywords: | volume variability latent news flow momentum underreaction to news mixture-of-distributions hypothesis |
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