Finance
@drboycewatkins1
Dr. Boyce Watkins
Title: Founder, The Black Wealth Bootcamp and The Black Business School
Research Topic: Investor, Trading Patterns And Return Predictability
Institution: The Ohio State University
Committee Chair: Professor G. Andrew Karolyi
Abstract: Many unanswered questions remain when attempting to determine the motivating factors behind investor trade. Also, contemporary asset pricing models continue to be challenged by seemingly irrational return predictability and additional trading that does not appear to be motivated by information arrival or heterogeneous processing of private and public signals. This dissertation dissects the reasons that investors trade, and also presents evidence of return predictability related to trading and past stock returns.
In the first dissertation essay, I analyze the factors that explain trading volume growth in equity securities. It is found that technical and statistical factors are strong explanatory factors for trading volume growth in the cross-section, while statistical and macro factors are strong sources of time variation.
The second dissertation essay analyzes the first three moments of trading volume growth and determines that there is a link between these moments and future stock returns. It is found that stocks with high mean trading volume growth during the past 12 months experience strong positive excess returns that do not reverse themselves over the next 5 years. This result holds true for both NYSE/AMEX and Nasdaq stocks.
The third dissertation essay analyzes return consistency and determines if consistency is able to predict time-variation in expected returns. I analyze the degree to which return consistency in the past predicts future returns. It is discovered here that consistency is a strong predictor of future returns. In a portfolio context, positively consistent stocks exhibit higher future risk-adjusted returns than other securities in the cross-section, and negatively consistent stocks exhibit lower future risk-adjusted returns. It is also determined that high consistency enhances momentum when the two factors are allowed to interact. Thus, there appears to be strong path dependence in the momentum effect.
Title: Founder, The Black Wealth Bootcamp and The Black Business School
Research Topic: Investor, Trading Patterns And Return Predictability
Institution: The Ohio State University
Committee Chair: Professor G. Andrew Karolyi
Abstract: Many unanswered questions remain when attempting to determine the motivating factors behind investor trade. Also, contemporary asset pricing models continue to be challenged by seemingly irrational return predictability and additional trading that does not appear to be motivated by information arrival or heterogeneous processing of private and public signals. This dissertation dissects the reasons that investors trade, and also presents evidence of return predictability related to trading and past stock returns.
In the first dissertation essay, I analyze the factors that explain trading volume growth in equity securities. It is found that technical and statistical factors are strong explanatory factors for trading volume growth in the cross-section, while statistical and macro factors are strong sources of time variation.
The second dissertation essay analyzes the first three moments of trading volume growth and determines that there is a link between these moments and future stock returns. It is found that stocks with high mean trading volume growth during the past 12 months experience strong positive excess returns that do not reverse themselves over the next 5 years. This result holds true for both NYSE/AMEX and Nasdaq stocks.
The third dissertation essay analyzes return consistency and determines if consistency is able to predict time-variation in expected returns. I analyze the degree to which return consistency in the past predicts future returns. It is discovered here that consistency is a strong predictor of future returns. In a portfolio context, positively consistent stocks exhibit higher future risk-adjusted returns than other securities in the cross-section, and negatively consistent stocks exhibit lower future risk-adjusted returns. It is also determined that high consistency enhances momentum when the two factors are allowed to interact. Thus, there appears to be strong path dependence in the momentum effect.
| osu1038859045.pdf |