The high-volume return premium: Evidence from the Chinese stock market

Extreme trading activity contains valuable information about the future evolution of stock prices in the Chinese stock market. Over the next 30 trading days after the initial volume shocks, a high-low volume portfolio earns a net average cumulate return of 2.08% and a high-low volume and size portfolio earns 3.37%, suggesting that there exists a high-volume return premium and that Chinese investors favor high-volume small-size stocks. However, a volume momentum portfolio earns a -1.65% net average cumulative return, indicating that Chinese stocks exhibit a short-run reversal. Portfolio construction, market risk, and firm size do not seem to explain the results. © 2008 Springer Science+Business Media, LLC.