High-Volume Stocks Outperform: 500-Stock Strategy Surges 166% as Liquidity Drives Volatility

On August 6, 2025, First (FCNCA) closed with a 0.74% decline, trading at a volume of $0.31 billion, ranking 386th in daily trading activity. The stock’s performance aligns with broader market dynamics where liquidity concentration has emerged as a critical driver of short-term volatility.

Recent backtesting data reveals that a strategy targeting the top 500 high-volume stocks—held for one day—generated a 166.71% return from 2022 to the present. This far outperformed the benchmark’s 29.18% return, highlighting the outsized influence of liquidity on price momentum. High-volume stocks, often favored in volatile markets, attract trader activity that amplifies short-term price swings, creating opportunities for momentum-driven strategies.

However, the approach carries inherent risks. Rapid shifts in market sentiment can disrupt momentum, and high-volume stocks may not sustain performance. While the strategy’s historical success underscores liquidity’s role in short-term gains, investors must weigh the potential for sudden reversals, particularly in environments marked by unpredictable macroeconomic signals or sector-specific shocks.

The backtest results show that the strategy returned 166.71% from 2022 to the present, outperforming the benchmark by 137.53%. This emphasizes the impact of liquidity concentration on short-term stock performance, especially in volatile markets.