The Role of Trading Volume in the "Volatility Puzzle
- Authors
- Lee, Dong Wook
- Issue Date
- 10월-2015
- Publisher
- WILEY-BLACKWELL
- Keywords
- Volatility puzzle; Trading volume; Parameter uncertainty; Convexity
- Citation
- ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, v.44, no.5, pp.783 - 809
- Indexed
- SSCI
SCOPUS
KCI
- Journal Title
- ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES
- Volume
- 44
- Number
- 5
- Start Page
- 783
- End Page
- 809
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/92404
- DOI
- 10.1111/ajfs.12113
- ISSN
- 2041-9945
- Abstract
- We find that the negative average-return differential between high- and low-volatility stocksthe so-called volatility puzzleis particularly more pronounced when both groups of stocks have large trading volume. Conversely, the return differential is completely absent among low-turnover stocks. Such a high turnover-conditional volatility-future return relation is long-lived and present in various segments of the market and in different time-periodse.g., in both small and large stocks and during low- as well as high-investor sentiment periods. While the information contents of large trading volume are likely to be multi-dimensionalthereby allowing for different explanations, our results at least suggest that trading volume is a useful empirical guide to where to (not) find the average return differential between low- and high-volatility stocks. We also illustrate, in a setting that is neutral about market efficiency, how trading volume interacts with volatility and affects future returns.
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Collections - Korea University Business School > Department of Business Administration > 1. Journal Articles
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