## Event Study Methodology for Capturing Abnormal Trading

Besides return event studies, there are also event studies investigating whether the trading volumes of assets display statistically significant anomalies. These volume event studies apply the general principles of the event study methodology to time series of trading volumes. One major application of volume event studies is the investigation of insider trading preceding M&A announcements. In the US, volume event studies are increasingly used as evidence in security fraw litigation cases.

$$V_{it} = \log{\left(\frac{n_{it} + .000255}{S_{it}} \cdot 100\right)},\label{eq:log}$$
where $n_{it}$ is the number of shares traded for firm $i$ on day $t$ and $S_{it}$ is the outstanding share of firm $i$ on the trading day. Ajinkya and lain (1989) and Cready and Ramanan (1991) recommend strongly to use the log-transformed value instead of the non-log-transformed formula:
$$V_{it} = \frac{n_{it}}{S_{it}} \cdot 100.$$
The constant $.000255$ in Equation $\ref{eq:log}$ is added for avoiding the log-transformation on zero values.