Behavioral explanations of trading volume and short-horizon price patterns: An investigation of seven Asia-Pacific markets

• Main Authors: DING, David K., Mclnish, Thomas H., Wongchoti, Udomsak
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2008
• Subjects: Behavioral Explanations of Trading Volume and Short-Horizon Price Patterns: An Investigation of Seven Asia-Pacific Markets; Asian Studies; Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/1151; https://ink.library.smu.edu.sg/context/lkcsb_research/article/2150/viewcontent/Behavioral_explanations_of_trading_volume_2008.pdf
• Institution: Singapore Management University

We investigate whether behavioral postulations offer any implicit explanation of the country-varying relation between trading volume and price pattern among short-horizon winners/losers in seven Pacific-Basin markets during the period 1990 to 2000. Our findings lend credence to the Lee and Swaminathan [Lee, C. and Swaminathan, B., 2000. Price momentum and trading volume, Journal of Finance 55, 2017-2069.] Momentum Life Cycle explanation that high (low) volume winners (losers) are more likely to experience price reversals, whereas high (low) volume losers (winners), price momentum, in the subsequent period. This observation is especially pronounced in Hong Kong. Other models such as those based on an information diffusion process and overconfidence in glamour stocks offer limited explanation for the relation.