Publication Type
Journal Article
Version
submittedVersion
Publication Date
3-2022
Abstract
We find that expected return is related to trading volume positively among underpriced stocks but negatively among overpriced stocks. As such, trading volume amplifies mispricing. Our results are robust to alternative mispricing and trading volume measures, alternative portfolio formation methods, and controlling for variables that are known to have amplification effects on mispricing. By attributing trading volume to investor disagreement, we show that our results are consistent with the recent theoretical model of Atmaz and Basak (2018) in that investor disagreement predicts stock returns conditional on expectation bias.
Keywords
Turnover, Trading volume, Mispricing, Disagreement, Expectation bias
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
Journal of Financial Economics
Volume
143
Issue
3
First Page
1295
Last Page
1315
ISSN
0304-405X
Identifier
10.1016/j.jfineco.2021.05.014
Publisher
Elsevier
Citation
HAN, Yufeng; HUANG, Dashan; HUANG, Dayong; and ZHOU, Guofu.
Expected return, volume, and mispricing. (2022). Journal of Financial Economics. 143, (3), 1295-1315.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6898
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jfineco.2021.05.014