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Investor Sentiment, Trading Patterns and Return Predictability

Watkins, Boyce Dewhite
http://rave.ohiolink.edu/etdc/view?acc_num=osu1038859045

Abstract Details

2002, Doctor of Philosophy, Ohio State University, Business Administration.
Many unanswered questions remain when attempting to determine the motivating factors behind investor trade. Also, contemporary asset pricing models continue to be challenged by seemingly irrational return predictability and additional trading that does not appear to be motivated by information arrival or heterogeneous processing of private and public signals. This dissertation dissects the reasons that investors trade, and also presents evidence of return predictability related to trading and past stock returns. In the first dissertation essay, I analyze the factors that explain trading volume growth in equity securities. It is found that technical and statistical factors are strong explanatory factors for trading volume growth in the cross-section, while statistical and macro factors are strong sources of time variation. The second dissertation essay analyzes the first three moments of trading volume growth and determines that there is a link between these moments and future stock returns. It is found that stocks with high mean trading volume growth during the past 12 months experience strong positive excess returns that do not reverse themselves over the next 5 years. This result holds true for both NYSE/AMEX and Nasdaq stocks. The third dissertation essay analyzes return consistency and determines if consistency is able to predict time-variation in expected returns. I analyze the degree to which return consistency in the past predicts future returns. It is discovered here that consistency is a strong predictor of future returns. In a portfolio context, positively consistent stocks exhibit higher future risk-adjusted returns than other securities in the cross-section, and negatively consistent stocks exhibit lower future risk-adjusted returns. It is also determined that high consistency enhances momentum when the two factors are allowed to interact. Thus, there appears to be strong path dependence in the momentum effect.
Andrew Karolyi (Advisor)
Business Administration, Banking
trading volume returns predictability momentum consistency turnover markets stock stocks exchange investors sentiment; Investor sentiment; stock market; Trading volume

Recommended Citations

Citations

  • Watkins, B. D. (2002). Investor Sentiment, Trading Patterns and Return Predictability [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1038859045

    APA Style (7th edition)

  • Watkins, Boyce. Investor Sentiment, Trading Patterns and Return Predictability. 2002. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1038859045.

    MLA Style (8th edition)

  • Watkins, Boyce. "Investor Sentiment, Trading Patterns and Return Predictability." Doctoral dissertation, Ohio State University, 2002. http://rave.ohiolink.edu/etdc/view?acc_num=osu1038859045

    Chicago Manual of Style (17th edition)

osu1038859045
8,819
© 2002, all rights reserved.
This open access ETD is published by The Ohio State University and OhioLINK.