Anomaly Outlook
Volume · Datar, Naik and Radcliffe (1998)

Share Turnover

Average monthly share trading volume over the prior three months scaled by shares outstanding, a turnover measure classified as high above 10% and low below 5%. Long low minus short high portfolio built as the original paper built it (its sort, weighting and stock screens, as replicated by Open Source Asset Pricing), hedged each month with a rolling 5-year market beta from prior months only (β = −0.35 at the end of the sample). Quarterly, 1929Q3 to 2024Q4.

Predicted alphareturn · posterior mean, % per year, averaged over the window
Next quarter
2027Q1
5.53%
95% interval 2.21% to 8.50%
Next year
2027Q1–2027Q4
5.54%
95% interval 2.22% to 8.49%
Next five years
2027Q1–2031Q4
5.57%
95% interval 2.27% to 8.51%

Forecast made 1 Oct 2026, conditioning on this portfolio's returns, which end 2024Q4 with Open Source Asset Pricing's data for the signal (ShareVol). The 8 quarters between then and 2027Q1 are unobserved and are integrated out under the model.

Market hedge
Prior beliefsDefault
Half life of shocks to the edge How long an edge lasts once it appears. The model treats the edge -- the expected alpha under a market hedge, the expected return without one -- as a mean-reverting state; this is the prior on its half-life. A short half-life pulls the forecast back toward the long-run mean quickly, so recent performance counts for less. Short U(0, 5 years)Default U(0, 10 years)Long U(0, 20 years)
Long-run performance How much long-run edge the model is willing to believe in before the data insists on it. The prior on the portfolio's annualized risk-adjusted return (its information ratio under a hedge, Sharpe ratio without one) is centred on zero; this is its width. A narrow prior takes more evidence to move, so every forecast is pulled harder toward zero. Skeptical N(0, 0.2²)Default N(0, 0.4²)Permissive N(0, 0.6²)
Time variation in risk-adjusted returns How far an edge swings around its long-run level. The previous row sets how large that long-run level may be; this one sets how much the portfolio's risk-adjusted return wanders above and below it from quarter to quarter. Allow more, and a good or bad run reads as news about the edge rather than as noise. Conservative U(0, 0.25)Default U(0, 0.5)Aggressive U(0, 0.75)

This signal takes only a few distinct values, so it cannot be cut into quintiles or deciles. Only the original paper's portfolio, as replicated by Open Source Asset Pricing, is shown.

Cumulative market-hedged returnreturn, unhedged

+14,331% since 1929Q3 · log scale

Past performance, annualized

Window AlphaReturn Vol. Info. ratioSharpe ratio t-stat
1929Q3–2024Q4 6.24% 14.31% 0.44 4.25
2020Q1–2024Q4 −1.20% 9.86% −0.12 −0.27
2024Q1–2024Q4 8.03% 9.93% 0.81 0.81

Forecast information ratioSharpe ratio, annualized

Window Mean 95% interval P(neg)
2027Q1 0.39 0.15 – 0.59 <0.01
2027Q1–2027Q4 0.39 0.15 – 0.60 <0.01
2027Q1–2031Q4 0.38 0.14 – 0.60 <0.01
Prior changed from site default.
Category
Volume
Form
Discrete
Sorted on
Low minus high
Names per leg
393 long / 34 short median · 10 at the 10th pctile
Original sample
1962–1991