TY  - JOUR
AU  - Lo,Andrew W.
AU  - Wang,Jiang W.
TI  - Trading Volume: Definitions, Data Analysis, and Implications of Portfolio Theory
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7625
PY  - 2000
Y2  - March 2000
UR  - http://www.nber.org/papers/w7625
L1  - http://www.nber.org/papers/w7625.pdf
N1  - Author contact info:
Andrew W. Lo
MIT Sloan School of Management
100 Main Street, E62-618
Cambridge, MA  02142
Tel: 617/253-0920
Fax: 781/891-9783
E-Mail: alo@mit.edu

Jiang Wang
MIT Sloan School of Management
100 Main Street, E62-614
Cambridge, MA 02142
Tel: 617/253-2632
Fax: 617/258-6855
E-Mail: wangj@mit.edu
AB  - We examine the implications of portfolio theory for the cross-sectional behavior of equity trading volume.  Two-fund separation theorems suggest a natural definition for trading activity: share turnover.  If two-fund separation holds, share turnover must be identical for all securities.  If (K+1)-fund separation holds, we show that turnover satisfies an approximately linear K-factor structure.  These implications are examined empirically using individual weekly turnover data for NYSE and AMEX securities from 1962 to 1996.  We find strong evidence against two-fund separation, and a principal-components decomposition suggests that turnover is well approximated by a two-factor linear model.
ER  -