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

Kód výsledku v IS VaVaI

RIV/00216208:11230/19:10395923 - isvavai.cz

Výsledek na webu

https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=dRXMtrOItq

DOI - Digital Object Identifier

10.1002/for.2582

Jazyk výsledku

angličtina

Název v původním jazyce

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

Popis výsledku v původním jazyce

We show that contrasting results on trading volume's predictive role for short-horizon reversals in stock returns can be reconciled by conditioning on different investor types' 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.

Název v anglickém jazyce

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

Popis výsledku anglicky

We show that contrasting results on trading volume's predictive role for short-horizon reversals in stock returns can be reconciled by conditioning on different investor types' 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.

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

50201 - Economic Theory

Projekt

—

Návaznosti

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Rok uplatnění

2019

Kód důvěrnosti údajů

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

Název periodika

Journal of Forecasting

ISSN

0277-6693

e-ISSN

—

Svazek periodika

38

Číslo periodika v rámci svazku

6

Stát vydavatele periodika

GB - Spojené království Velké Británie a Severního Irska

Počet stran výsledku

18

Strana od-do

582-599

Kód UT WoS článku

000478595100007

EID výsledku v databázi Scopus

2-s2.0-85063148624