The Real Side of the High-Volume Return Premium
Israeli D. Kaniel R. Sridharan S.A.
February 2022INFORMS Inst.for Operations Res.and the Management Sciences
Management Science
2022#68Issue 21426 - 1449 pp.
Prior literature demonstrates that increased trading activity of a firm’s stock is associated with abnormal future stock returns (the high-volume return premium) and interprets this phenomenon as evidence that increased visibility generates reductions in cost of capital. Motivated by this interpretation, we investigate whether increased trading activity entails changes in real corporate actions. We document a positive relation between abnormal trading volume, future investment expenditures, and financing cash flows. This positive relation is not subsumed by the arrival of investment-related news or other corporate disclosures or by subsequent earnings information and is concentrated among firms with high financial constraints and firms with lower levels of investor recognition.
corporate investment , financing cash flows , investor recognition , trading volume
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Arison School of Business, Interdisciplinary Center (IDC) Herzliya, Herzliya, 4610101, Israel
Graduate School of Business, Nazarbayev University, Nur-Sultan City, 010000, Kazakhstan
Simon School of Business, University of Rochester, Rochester, 14627, NY, United States
Fanhai International School of Finance, Fudan, Shanghai, 200001, China
Center for Economic and Policy Research, District of Columbia, Washington, 20009, United States
Goizueta Business School, Emory University, Atlanta, 30322, GA, United States
Arison School of Business
Graduate School of Business
Simon School of Business
Fanhai International School of Finance
Center for Economic and Policy Research
Goizueta Business School
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