The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Volume and Autocovariances in Short‐Horizon Individual Security Returns
Published: 09/01/1994 | DOI: 10.1111/j.1540-6261.1994.tb02455.x
JENNIFER S. CONRAD, ALLAUDEEN HAMEED, CATHY NIDEN
This article tests for the relations between trading volume and subsequent returns patterns in individual securities' short‐horizon returns that are suggested by such articles as Blume, Easley, and O'Hara (1994) and Campbell, Grossman, and Wang (1993). Using a variant of Lehmann's (1990) contrarian trading strategy, we find strong evidence of a relation between trading activity and subsequent autocovariances in weekly returns. Specifically, high‐transaction securities experience price reversals, while the returns of low‐transactions securities are positively autocovarying. Overall, information on trading activity appears to be an important predictor of the returns of individual securities.