Difference of Opinion, Overconfidence, and the High-volume Return PremiumJournal of Financial Research
AbstractWe 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.
CopyrightCopyright © 2011, Southern Finance Association and the Southwestern Finance Association
PublisherJohn Wiley & Sons
Citation InformationZhaodan Huang, James B. Heian and Ting Zhang. "Difference of Opinion, Overconfidence, and the High-volume Return Premium" Journal of Financial Research Vol. 34 Iss. 1 (2011)
Available at: http://works.bepress.com/ting-zhang/4/