Title page for ETD etd-06232005-133134

Type of Document Dissertation
Author Lei, Yung-Chou
URN etd-06232005-133134
Title The Trading Volume Trend, Investor Sentiment, and Stock Returns
Degree Doctor of Philosophy (Ph.D.)
Department Finance (Business Administration)
Advisory Committee
Advisor Name Title
Ji-Chai Lin Committee Chair
Gary C. Sanger Committee Member
Harley E. Ryan, Jr. Committee Member
R. Carter Hill Committee Member
Michael A. Dunn Dean's Representative
  • anomaly
  • market efficiency
  • trading volume change
Date of Defense 2005-04-13
Availability unrestricted
This dissertation relates the information contained in past trading volume to investor sentiment, and investigates its ability in predicting stock returns. Investor sentiment here refers to the enthusiasm of irrational investors on an asset, relative to that of rational investors. Motivated by Baker and Stein (2004) that an increase in trading volume reflects a rise in investor sentiment, I use the change in trading volume per unit of time, referring it as the trading volume trend, as a measure of investor sentiment on individual stocks.

I document a negative and significant cross-sectional relation between the trading volume trend and stock returns, both in the short term and in the long run. This relation is dynamic and holds after controlling for several liquidity measures and other possible determinants of expected returns. It also holds for various volume measures and momentum portfolios. Specifically, both winner and loser portfolios show the effect of the trading volume trend. The effect exists in stocks of small and large firms, and in optioned and non-optioned stocks. These findings suggest that the negative effect of the trading volume trend on stocks returns is robust.

Moreover, a composite trading volume trend, formed on the trading volume trends of individual stocks, can predict both the equally-weighted and the value-weighted market returns in the expected direction, after controlling for other possible determinants of market returns. The composite trading volume trend also explains closed-end fund discounts. Collectively these findings support that the trading volume trend contains information on investor sentiment, and that investor sentiment has a valuation effect on stocks.

  Filename       Size       Approximate Download Time (Hours:Minutes:Seconds) 
 28.8 Modem   56K Modem   ISDN (64 Kb)   ISDN (128 Kb)   Higher-speed Access 
  Lei_dis.pdf 759.07 Kb 00:03:30 00:01:48 00:01:34 00:00:47 00:00:04

Browse All Available ETDs by ( Author | Department )

If you have more questions or technical problems, please Contact LSU-ETD Support.