The Unusual Trading Volume and Earnings Surprises in China’s Market

This study examines the empirical relationship between unusual trading volume and earnings surprises in China's A-share market. We provide evidence that an unusually low trading volume contains negative information about firm fundamentals. Moreover, unusual trading volumes could predict abnormal returns close to the earnings announcement date. The degree of and changes in the divergence of opinion could explain this result. Our study provides an insight into China's market, where short sales are strictly forbidden. We report a strong relationship that is quite different from that described in most studies on the United States market. The differences in the findings are likely due to differences in the nature of the market, which is consistent with Miller (1977).