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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27250
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| Title: | Turning Over Turnover |
| Authors: | Cremers, K.J. Martijn
Mei, Jianping |
| Issue Date: | Nov-2004 |
| Series/Report no.: | FIN-03-025 |
| Abstract: | The methodology of Bai and Ng (2002, 2003) for decomposing large panel
data into systematic and idiosyncratic components is applied to both
returns and turnover. Combining this with a GLS-based principal
components approach, we demonstrate that their procedure works well for
both returns and turnover despite the presence of severe
heteroscedasticity and non-stationarity in turnover of individual
stocks. We then test Lo and Wang's (2000) theoretical model's
restriction that returns and turnover should have the same number of
systematic factors. This is songly rejected by the data, suggesting
stock price and trading volume may not be compatible under the existing
multi-factor asset pricing-trading framework. We also demonsate that
several commonly used turnover measures may understate the price impact
of stock trading. |
| URI: | http://hdl.handle.net/2451/27250 |
| Appears in Collections: | Finance Working Papers
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