Dynamic Volume Ratio And Stock Expected Return

In recent years,there have long been substantial academic and practical interests in trading volume of stocks. One of essential issues is whether and how trading volume conveys valuable information to the market. Volume seems to be regarded as liquidity, momentum, investor sentiment, noise trading, information trading, and "visibility" that the purpose of this article will focus on.Interestingly, from their research work,we can find the relation between volume and returns are different from the impact of their effects, and even the direction of influence. So this article inspection volume again, especially the dynamic relation between trading volume and future stock returns. Considering the current study, there is no a uniform volume measuring method, this paper redefines the concept of incremental volume, with the weekly volume divided by the highest volume in the first nine weeks, hereinafter referred to as D.V.R to represent the dynamic changes of the volume.The empirical results are as follows:abnormal trading volume affects subsequent stock returns for several months. The volume return premium generated from medium turnover high D.V.R portfolio and high turnover low D.V.R portfolio is7.71%per year. We argue that this return premium is consistent with the idea that shocks in the dynamic volume of a stock affect its visibility. Stock sentiment, recessions, skewness, and liquidity risk do not seem to explain our results.