Trading Volume and Arbitrage
Darolles, Serge; Le Fol, Gaëlle (2014), Trading Volume and Arbitrage, Annual International Conference on Accounting & Finance. 2014, Global Science & Technology Forum, p. 121-131
Type
Communication / ConférenceDate
2014Conference title
4th Annual International Conference on Accounting and Finance (AF 2014)Conference date
2014-04Conference city
PhuketConference country
THAILANDBook title
Annual International Conference on Accounting & Finance. 2014Publisher
Global Science & Technology Forum
Pages
121-131
Metadata
Show full item recordAuthor(s)
Darolles, SergeDauphine Recherches en Management [DRM]
Le Fol, Gaëlle
Dauphine Recherches en Management [DRM]
Abstract (EN)
Decomposing returns into market and stock specific components is common practice and forms the basis of popular asset pricing models. What about volume? Can volume be decomposed in the same way as returns? Lo and Wang (2000) suggest such a decomposition. Our paper contributes to this literature in two different ways. First, we provide a model to explain why volumes deviate from the benchmark. Our interpretation is in terms of arbitrage strategies and liquidity. Second, we propose a new efficient screening tool that allows practitioners to extract specific information from volume time series. We provide an empirical illustration of the relevance and the possible uses of our approach on daily data from the FTSE index from 2000 to 2002.Subjects / Keywords
Liquidity; Volume; Market portfolio; ArbitrageRelated items
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