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The high-volume return premium: Does it exist in the Chinese stock market?

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  • Wang, Peipei
  • Wen, Yuanji
  • Singh, Harminder
Abstract
In this paper we examine the information content of extreme trading activity in the Chinese stock market. We find that zero-investment portfolios that are constructed by buying high-volume and selling low-volume stocks do not generate positive returns (high-volume return premium), which is apparent in developed markets. In contrast, we find that there is a high-volume return discount in speculative stocks (i.e., small-cap stocks, stocks with low institutional ownership and stocks with low analyst-coverage). These stocks tend to have a high degree of over-valuation in the short term followed by a relatively low return. In support, we find a larger discount in the winners group than in the losers group.

Suggested Citation

  • Wang, Peipei & Wen, Yuanji & Singh, Harminder, 2017. "The high-volume return premium: Does it exist in the Chinese stock market?," Pacific-Basin Finance Journal, Elsevier, vol. 46(PB), pages 323-336.
    • Handle: RePEc:eee:pacfin:v:46:y:2017:i:pb:p:323-336
    DOI: 10.1016/j.pacfin.2017.10.003
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    More about this item

    Keywords

    Return premium; Volume shock; Chinese stock market; Speculation;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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