Deakin University
Browse

File(s) under permanent embargo

Liquidity and autocorrelations in individual stock returns

journal contribution
posted on 2006-10-01, 00:00 authored by D Avramov, Tarun ChordiaTarun Chordia, A Goyal
This paper documents a strong relationship between short-run reversals and stock illiquidity, even after controlling for trading volume. The largest reversals and the potential contrarian trading strategy profits occur in high turnover, low liquidity stocks, as the price pressures caused by non-informational demands for immediacy are accommodated. However, the contrarian trading strategy profits are smaller than the likely transactions costs. This lack of profitability and the fact that the overall findings are consistent with rational equilibrium paradigms suggest that the violation of the efficient market hypothesis due to short-term reversals is not so egregious after all.

History

Journal

Journal of finance

Volume

61

Issue

5

Pagination

2365 - 2394

Publisher

Wiley

Location

Chichester, Eng.

ISSN

0022-1082

eISSN

1540-6261

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal

Copyright notice

2006, American Finance Association

Usage metrics

    Research Publications

    Categories

    No categories selected

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC