Low Volume and Future Changes in the Stock Market

Abstract

This paper provides an empirical investigation of whether low volume days produce different subsequent results than other days. Daily S&P 500 returns are groups classified by volume as well as market direction. Subsequent returns are tied both to previous market direction and volume. High volume is associated with higher subsequent daily return variability, and low volume is associated with lower subsequent daily return variability. Of particular note, down market days with low volume have the highest next-day average returns and the lowest next-day return standard deviation.