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Does Contemporaneous Trading Volume Contain Any Information About Future Stock Prices?: Investigating Volume-Return Relationships on the Stockholm Stock Exchange
Stockholm University, Faculty of Social Sciences, School of Business.
2001 (English)Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

Studies on U.S. stock markets show that stocks experiencing high trading volume outperform stocks experiencing low trading volume. The existence of this high-volume return premium is investigated on stocks listed at the Stockholm Stock Exchange during the period January 1980 to October 2001. Using a similar methodology as the studies in the U.S., this paper presents out-of-sample evidence of a high-volume return premium. This premium lasts for at least two months following the volume shocks and is larger in both magnitude and statistical significance for weekly volume shocks compared to daily volume shocks. Furthermore, small capitalization stocks have a larger high-volume return premium than large capitalization stocks. However, past loser stocks do not have a larger high-volume return premium than past winner stocks, as documented on U.S. stock markets. Overall, the findings show that contemporaneous trading volume does contain information about future stock prices. This implies that investors should use trading volume as one criterion for their investment decisions, as recommended by most technical analysts.

Place, publisher, year, edition, pages
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Business Administration
URN: urn:nbn:se:su:diva-2618OAI: diva2:191677
Available from: 2007-01-05 Created: 2007-01-05

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