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Kramer, Charles Frederick.

Noise Trading, Transaction Costs, and the Relationship of Stock Returns and Trading Volume Charles Frederick Kramer. [electronic resource] / Charles Frederick Kramer. - Washington, D.C. : International Monetary Fund, 1994. - 1 online resource (36 p.) - IMF Working Papers; Working Paper ; No. 94/126 . - IMF Working Papers; Working Paper ; No. 94/126 .

The relationship of stock returns and trading volume is the focus of much recent interest. I examine an economic model of a rational trader who operates in a market with transactions costs and noise trading. The level of trading affects the rational trader's marginal cost of transacting; as a result, trading volume is a source of risk. This engenders an equilibrium relationship between returns and volume. The model also provides a simple way to scrutinize this relationship empirically. Empirical evidence supports the implications of the model.

ISBN: 1451854870 : 15.00 USD

ISSN: 1018-5941

Standard No.: 10.5089/9781451854879.001 doi

Subjects--Topical Terms:
Equation
Explanatory Power
Orthogonality
Statistics
Transactions Costs

Subjects--Geographic Terms:
United States