Difference of Opinion, Overconfidence, and the High-volume Return Premium
Journal of Financial Research
We 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.
Copyright © 2011, Southern Finance Association and the Southwestern Finance Association
John Wiley & Sons
Huang, Zhaodan; Heian, James B.; and Zhang, Ting, "Difference of Opinion, Overconfidence, and the High-volume Return Premium" (2011). Economics and Finance Faculty Publications. 36.