Title

Difference of Opinion, Overconfidence, and the High-volume Return Premium

Document Type

Article

Publication Date

Spring 2011

Publication Source

Journal of Financial Research

Abstract

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.

Inclusive pages

1-25

ISBN/ISSN

0270-2592

Comments

Permission documentation is on file.

Publisher

John Wiley & Sons

Volume

34

Issue

1

Peer Reviewed

yes