TY  - BOOK
AU  - Lo,Andrew W.
AU  - Wang,Jiang
ED  - National Bureau of Economic Research.
TI  - Trading Volume: Implications of An Intertemporal Capital Asset Pricing Model 
T2  - NBER working paper series
PY  - 2001///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - October 2001; Hardcopy version available to institutional subscribers
N2  - We derive an intertemporal capital asset pricing model with multiple assets and heterogeneous investors, and explore its implications for the behavior of trading volume and asset returns. Assets contain two types of risks: market risk and the risk of changing market conditions. We show that investors trade only in two portfolios: the market portfolio, and a hedging portfolio, which allows them to hedge the dynamic risk. This implies that trading volume of individual assets exhibit a two-factor structure, and their factor loadings depend on their weights in the hedging portfolio. This allows us to empirically identify the hedging portfolio using volume data. We then test the two properties of the hedging portfolio: its return provides the best predictor of future market returns and its return together with the return of the market portfolio are the two risk factors determining the cross-section of asset returns
UR  - https://www.nber.org/papers/w8565
UR  - http://dx.doi.org/10.3386/w8565
ER  -