This study investigates the effect of high trading volume on observed stock volatility controlling for fundamental information. We investigate a number of settings, including two natural experiments (exchange-traded funds [ETFs] and dual-class shares), the aggregate timeseries of U.S. stocks since 1926, and the cross-section of U.S. stocks during the last 20 years. Our main finding is that there is an economically substantial positive relation between trading volume and stock volatility, especially when trading volume is high. The conclusion is that stock trading can inject volatility above and beyond that based on fundamentals.
Both sell-side analysts and the media are information intermediaries in capital markets. This study investigates the association between sell-side analyst research and information in firm-specific news coverage. More frequent recent news coverage is associated with stronger market reactions to analysts' research revisions, and primarily explained by soft information in news coverage. The primary result is robust to using both an instrumental variable and a quasi-natural experimental setting to generate exogenous variation in media coverage, alleviating concerns about endogeneity. In addition, using textual analysis, we document that explicit media references in analyst research reports are significantly associated with more frequent analyst revisions and stronger market reactions to revisions. Our study provides empirical evidence of analysts' assimilation of information from the financial press and their role in the efficiency of capital markets.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.