Trading volume and prediction of stock return reversals: Conditioning on investor types' trading

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11230%2F19%3A10395923" target="_blank" >RIV/00216208:11230/19:10395923 - isvavai.cz</a>

Result on the web

<a href="https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=dRXMtrOItq" target="_blank" >https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=dRXMtrOItq</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1002/for.2582" target="_blank" >10.1002/for.2582</a>

Result language

angličtina

Original language name

Trading volume and prediction of stock return reversals: Conditioning on investor types' trading

Original language description

We show that contrasting results on trading volume&apos;s predictive role for short-horizon reversals in stock returns can be reconciled by conditioning on different investor types&apos; trading. Using unique trading data by investor type from Korea, we provide explicit evidence of three distinct mechanisms leading to contrasting outcomes: (i) informed buying-price increases accompanied by high institutional buying volume are less likely to reverse; (ii) liquidity selling-price declines accompanied by high institutional selling volume in institutional investor habitat are more likely to reverse; (iii) attention-driven speculative buying-price increases accompanied by high individual buying-volume in individual investor habitat are more likely to reverse. Our approach to predict which mechanism will prevail improves reversal forecasts following return shocks: An augmented contrarian strategy utilizing our ex ante formulation increases short-horizon reversal strategy profitability by 40-70% in the US and Korean stock markets.

Czech name

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Czech description

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Type

J_imp - Article in a specialist periodical, which is included in the Web of Science database

CEP classification

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OECD FORD branch

50201 - Economic Theory

Project

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Continuities

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year

2019

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

Journal of Forecasting

ISSN

0277-6693

e-ISSN

—

Volume of the periodical

38

Issue of the periodical within the volume

6

Country of publishing house

GB - UNITED KINGDOM

Number of pages

18

Pages from-to

582-599

UT code for WoS article

000478595100007

EID of the result in the Scopus database

2-s2.0-85063148624