7.4.1 Volume sorts

Trading volume is one indicator of the attention a stock is receiving. Table 7.1 presents buy–sell imbalances for stocks sorted on the current day's abnormal trading volume. Buy–sell imbalances are reported for investors at a large discount brokerage, a large retail brokerage, a small discount brokerage, and for institutional money managers following momentum, value, and diversified strategies. Buy–sell imbalances are calculated using both the number of trades and the value of trades. Our principal objective is to understand how attention affects the purchase decisions of all investors. Calculating Buy–sell imbalances by the value of trades has the advantage of offering a better gauge of the economic importance of our observations, but the disadvantage of overweighting the decisions of wealthier investors. In trying to understand investors' decision processes, calculating buy–sell imbalances by number of trades may be most appropriate.

Table 7.1. Buy–sell Imbalances by investor type for stocks sorted on the current day's abnormal trading volume. Stocks are sorted daily into deciles on the basis on the current day' 's abnormal volume. The decile of highest abnormal volume is split into two vingtiles (10a and 10b). Abnormal volume is calculated as the ratio of the current day's volume (as reported in the CRSP daily stock return files for NYSE, ASE, and NASDAQ stocks) divided by the average volume over the previous 252 trading days. Buy–sell imbalances ...

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