Abstract

Using transaction level data spanning across eighteen years over 1993 to 2010, we show that heavily bought stocks or heavily sold stocks display persistence in buy and sell order respectively. We show that over one trading day horizon, the persistence is strong enough to generate economically significant return. CAPM market factor, Fama-French Size and Book to Market factors, as well as Carhart’s momentum factor do not explain these results. However, the returns can be at least partially explained by investor sentiment variables and macroeconomic condition variables such as term and default spread and business cycle.