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VOLUME AND R 2: A FIRST LOOK
Author(s) -
Cornell Bradford
Publication year - 1990
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1990.tb00530.x
Subject(s) - stock (firearms) , proxy (statistics) , economics , econometrics , stock market , conjecture , financial economics , irrational number , regression , private information retrieval , monetary economics , mathematics , statistics , combinatorics , engineering , history , context (archaeology) , geometry , archaeology , mechanical engineering
Roll (1988) reports that when days on which public announcements occur are excluded from a regression of stock returns on market returns, the R 2 s are largely unaffected. To explain his findings, Roll suggests that much of the firm‐specific movements in common stocks may be a result of private information or occasional trading frenzy. As a test of Roll's conjecture, volume is used in this study as a proxy to capture the impact of firm‐specific information and irrational trading. If Roll's conjecture is correct, the R 2 should rise when high‐volume days are excluded from a regression of stock returns on market returns. The results presented here are consistent with that prediction, but they are not strong.