We argue that both differences of opinion and overconfidence lead to high-volume shocks. However, a high-volume shock induced mainly by differences of opinion (overconfidence) will lead to superior (inferior) stock returns. Empirically, Asian financial markets, in contrast to U.S. markets, reveal weaker and inconsistent high-volume premiums. The inconsistency may be attributable to investor's overconfidence. Additional evidence based on U.S. data supports this view, as a high-volume shock accompanied by increased institutional ownership yields substantially higher high-volume premiums than otherwise, and high-volume premiums generally are much stronger in down-market states than up-market states.
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