Working Paper: NBER ID: w23650
Authors: Alexander M. Chinco; Mao Ye
Abstract: This paper uses wavelets to decompose each stock’s trading-volume variance into frequency-specific components. We find that stocks dominated by short-run fluctuations in trading volume have abnormal returns that are 1% per month higher than otherwise similar stocks where short-run fluctuations in volume are less important—i.e., stocks with less of a short-run tilt. And, we document that a stock’s short-run tilt can change rapidly from month to month, suggesting that these abnormal returns are not due to some persistent firm characteristic that’s simultaneously adding both short-run fluctuations and long-term risk.
Keywords: investment horizon; trading volume; abnormal returns; wavelet variance estimator
JEL Codes: C55; C58; G12; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| shortrun fluctuations in trading volume (E32) | abnormal returns (G14) |
| stocks with less shortrun tilt (G40) | lower abnormal returns (G12) |
| shortrun tilt changes rapidly (E32) | variability in abnormal returns (C29) |