Price Momentum and Trading Volume

Author(s): CHARLES M.C.LEE AND BHASKARAN SWAMINATHAN

Abstract: This study shows that past trading volume provides an important link between "momentum" and "value" strategies. Specifically, we find that firms with high (low) past turnover ratios exhibit many glamour(value) characteristics, earn lower (higher) future returns,and have consisitently more negative(positive) earnings surprises over the next eight quarters.Past trading volume aslo perdicts both the magnitude and persistence of price momentum. Sepciffically, price momentum effects reverse over the next five years,and high (low) wolume winners (losers) experience faster reversals.Collectively,our findings show that past volume helps to recondile intermediate-horizon "underreaction" and long-horizon "overreaction" effects.

Lee and Swaminathan 2000.pdf