Does Trading Volume Contain Information About Future Stock Returns?: A Quest for a Trading Strategy Using the High-Volume Return Premium
Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
The purpose of this study is to outline a trading strategy that generates abnormal return in the presence of transaction costs. Using a sample of stocks listed on the Stockholm Stock Exchange during January 1997 to November 2001, the existence of a high-volume return premium is firmly established. We also show that the premium is not a compensation for an increase in risk. When adjusting for transaction costs, measured as the bid-ask spread, there exists no profitable strategy using a zero investment portfolio. However, the results indicate that a more sophisticated trading strategy that reduces the effects of the transaction costs could yield a profit. Also, alternative trading strategies might utilize the high-volume return premium in more efficient ways.
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IdentifiersURN: urn:nbn:se:su:diva-2977OAI: oai:DiVA.org:su-2977DiVA: diva2:192120