Kauppatieteellinen tiedekunta, 2017
Laskentatoimi ja rahoitus
Master's Degree Programme in Finance
This thesis tests whether the high-volume return premium is present in the Finnish stock market during a time horizon from April 1994 to May 2016. It provides a theoretical insight into the importance of trading volume, and how it may be used to predict future price movements of stocks. The thesis is thus testing whether the weak-form of the efficient market hypothesis holds in the Finnish stock market.
Stocks are classified as high (low) volume based on their previous 49 days trading volume, and placed in long (short) portfolios, which are then held for up to 100 days without rebalancing. Stocks are then classified as small, medium, and large sized firms based on end year market capitalization.
The results show weak evidence to support the existence of the high-volume return premium based on daily data. Weekly data does show significant returns for medium and large sized firms. This is not due to return autocorrelations or extreme values. However, it does turn out that the returns are purely driven by shifts in systematic risk.
High-volume return premium, Trading volume.