Does Volume Chase Information?
51 Pages Posted: 26 Jan 2014
Date Written: August 23, 2013
Abstract
This study investigates the impact of proprietary traders on information-related trading volume. We argue that news-based proprietary traders contribute a large and essentially fixed amount of trading volume to the market. Consequently, their impact becomes “detectable” with intertemporal variation in the number of news events, and is most pronounced on days when the total number of news events is low. We indeed document that on low versus high news days (1) firms with earnings announcements experience significantly greater abnormal trading volume, and (2) the positive relation between abnormal trading volume and the magnitude of price changes is significantly stronger.
Keywords: Trading Volume, Information Arrival, Earnings Announcements, Proprietary Trading
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