Stock returns explained - using a volume filter, interest rates, and the oil price

Abstract: Using a volume filter on daily index and stock price data the daily return has been researched. The explanatory variables used in the study are the 1 M T-Bill, the term spread - 10 Y Treasury bond versus a 3 M T-Bill -, and the oil price. The results revealed that accounting for trade volume is an important part in explaining the return of a stock or index. The volume activity provides additional insights of when a relation between the explanatory variables and the stock return are valid. It also reveals that the relation varies significantly across different volume activity. The most reliable and consistent variables was the oil price and the term spread, both demonstrating a positive relation. The results also revealed that there are differences between high and low turnover stocks.