Charles A. Dice Center for Research in Financial Economics

Do investors trade more when stocks have performed well? Evidence from 46 countries

John M. Griffin, Federico Nardari, and René M. Stulz

ABSTRACT

This paper investigates the dynamic relation between market-wide trading activity and returns in 46 markets. Many stock markets exhibit a strong positive relation between turnover and past returns. These findings stand up in the face of various controls for volatility, alternative definitions for turnover, differing sample periods, and are present at both the weekly and daily frequency. The relation is more statistically and economically significant in countries with restrictions on short sales, where corruption is higher, and where the allocative efficiency of the stock market is weaker. The return-volume relation is also stronger for individual investors than for institutional or foreign investors.

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