Psychological aspects of stock returns accompanied by high trading volumes

Present study explores the effect of the availability heuristic (representing people's tendency to determine the likelihood of an event according to the easiness of recalling similar instances, and, thus, to overweight current information, as opposed to processing all relevant information) on stock price dynamics following days of extremely high trading volumes. I hypothesize that if the sign of a stock's return on the day when it registers an extremely high trading volume corresponds to the sign of the same day's stock market index return, then because of the effect of the availability heuristic, investors may consider the underlying important news to have a greater subjective probability of leading to stock returns of the respective sign, amplifying the latter and creating overreaction, which results in subsequent price reversal.
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Psychological aspects of stock returns accompanied by high trading volumes