Trading Volume and Time Varying Betas | Zendy

Christopher M. Hrdlicka | Zendy

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Trading Volume and Time Varying Betas

Author(s) -

Christopher M. Hrdlicka

Publication year - 2021

Publication title -

review of finance

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 4.933

H-Index - 61

eISSN - 1875-824X

pISSN - 1572-3097

DOI - 10.1093/rof/rfab014

Subject(s) - cash flow , economics , stock (firearms) , econometrics , turnover , beta (programming language) , inventory turnover , monetary economics , standard deviation , excess return , financial economics , stock exchange , biology , finance , mathematics , statistics , mechanical engineering , paleontology , context (archaeology) , management , computer science , engineering , programming language

I show that increased turnover accompanies changes in stocks’ risk exposures. A one standard deviation decrease in a stock’s market beta increases turnover as much as 25%. The sensitivity of turnover to beta changes has grown over time. Market beta changes explain as much as 5% of the monthly cross-sectional variation in turnover. VAR decompositions of returns show turnover is more strongly associated with discount rate news than cash flow news. This mechanism provides a new channel for turnover combined with realized returns to predict long horizon returns and cash flow changes. Further, this mechanism can amplify many prior explored motives for trade.

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