Volume and autocovariance in short-horizon stock returns: Evidence from 1992 to 1998 in Chile

This research investigates the relationship between volume and subsequent return patterns in individual securities' short-horizon returns. Using a variant of Lehmann's [Q. J. Econ. 105 (1990) 1.] contrarian trading strategy, we found strong evidence of a relationship between trading activity and subsequent autocovariances in weekly returns. Specifically, most of the relationship observed by Conrad et al. [J. Finance 49 (1994) 1305.] were validated in the Chilean capital market but not for highly traded winner securities. This result is explained by the presence of institutional investors and the low liquidity of the Chilean capital market. Similar to Conrad et al. [J. Finance 49 (1994) 1305.], we can conclude that the information on trading activity appears to be an important predictor of the returns of individual securities.