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Author:
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ISBN:
Category : Futures
Languages : en
Pages : 16
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Book Description
Author:
Publisher:
ISBN:
Category : Futures
Languages : en
Pages : 16
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Author: Michael Jens Smith
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ISBN:
Category :
Languages : en
Pages :
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Author: Abhay Abhyankar
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Category :
Languages : en
Pages :
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This paper investigates the intra-day pattern of bid-ask spreads, volatility, and volume on the London Stock Exchange. The primary focus of the study is to relate the empirically observed regularities to specific institutional features of the trading system on the Exchange. We also examine the robustness of the results with reference to changes in the trading hours. The data set used consists of quote and transactions data for about 147 stocks and 835 stocks during two quarters of 1990 and 1991. We test for statistical significance of the average inside spread, the volume, and the return volatility during 15-minute intervals using a GMM ( Generalized Method of Moments ) procedure which is robust to both serial correlation and heteroscedasticity. We also indicate graphically the intra-daily patterns in the inside spread, the trading volume, the number of transactions, and the return volatility. Our results suggest that the bid-ask spread is widest outside the Mandatory Quote Period (MQP), i.e. the period during which market-makers are obliged to post firm quotes. The spread narrows slightly over the trading day for highly traded stocks but is almost constant for less liquid stocks. The spread again widens from the end of the MQP till the close of the SEAQ system. We conjecture that the periods prior to and after the MQP provide quot;windowsquot; for price discovery prior to the MQP and for quot;cooling offquot; after the MQP. Trading volume for the entire sample shows a two-humped shape. However, a crude U-shaped pattern is seen for stocks in the highest trading decile based on volume and number of transactions. Volatility, based on the mid-point of the inside spread, also shows a U-shaped pattern. The higher volatility outside the MQP coincides with the greater price uncertainty prevailing during these time periods.
Author: Stephen Satchell
Publisher: Springer
ISBN: 1137554177
Category : Science
Languages : en
Pages : 416
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Book Description
Over the last 20 years hedge funds and derivatives have fluctuated in reputational terms; they have been blamed for the global financial crisis and been praised for the provision of liquidity in troubled times. Both topics are rather under-researched due to a combination of data and secrecy issues. This book is a collection of papers celebrating 20 years of the Journal of Derivatives and Hedge Funds (JDHF). The 18 papers included in this volume represent a small sample of influential papers included during the life of the Journal, representing industry-orientated research in these areas. With a Preface from co-editor of the journal Stephen Satchell, the first part of the collection focuses on hedge funds and the second on markets, prices and products.
Author: Syed Mujahid Hussain
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Category :
Languages : en
Pages :
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This paper undertakes a fresh empirical investigation of key financial market variables and the theories that link them. We employ high frequency 5-minute data that include transaction price, trading volume, and the close bid and ask quote for the period May 5, 2004 through September 29, 2005. We document a number of regularities in the pattern of intraday return volatility, trading volume and bid-ask spreads. We are able to confirm the reverse J-shaped pattern of intraday bid-ask spreads with the exception of a major bump following the intraday auction at 13:05 CET. The aggregate trading volume exhibits L-shaped pattern for the German blue chip index, while German index volatility displays a somewhat reverse J-shaped pattern with two major bumps at 14:30 and 15:30 CET. Our empirical findings show that contemporaneous and lagged trading volume and bid-ask spreads have numerically small but statistically significant effect on return volatility. Our results also indicate asymmetry in the effects of volume on conditional volatility. However, inclusion of both measures as proxy for informal arrival in the conditional volatility equation does not explain the well known volatility persistence in intraday stock returns.
Author: Hans R. Stoll
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 88
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Author: Shang-Jin Wei
Publisher:
ISBN:
Category : Foreign exchange
Languages : en
Pages : 58
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The paper studies the effect of the market's perceived exchange rate volatility on bid-ask spreads. The anticipated volatility is extracted from currency options data. An increase in the perceived volatility is found to widen bid-ask spreads. The direction of the effect is consistent with an option model of the spread, but the magnitude is smaller. An increase in trading volume of spot exchange rates also widens the spread. The omission of the trading volume, however, does not bias the estimate of the effect of the volatility on the spreads. Although the spread-volatility relation implied by the option model of the spread is close to linear, some form of nonlinearity can still be detected from the data.
Author: Jinliang Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
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This paper examines the relationship among daily information flow, return volatility, and bid-ask spreads based on the framework of the mixture of distribution hypothesis (MDH). The MDH model is modified to permit separate effects of informed and liquidity trading volume on return volatility. The results show that the positive relationship between volatility and volume is primarily driven by the informed component of trading. When we control for the information flow, volatility is negatively related to trading volume. Furthermore, bid-ask spreads are positively related to the intensity of information flow.
Author: Madhu Kalimipalli
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ISBN:
Category :
Languages : en
Pages :
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This paper examines the time-series relationship among volatility, volume and bid-ask spreads for the ten most actively traded bonds on the NYSE's Automated Bond System (ABS). The bonds examined here have a significant percentage of all their trades carried out on the ABS, but retail-sized transactions and time-clustering mandate a data analytic approach that accommodates irregularly spaced quotes. Latent volatility for each bond is extracted using an Autoregressive Conditional Duration (ACD) model that provides input into an ordered probit model for observed spreads. For the most part we find a significant positive (negative) relationship between latent volatility (trading volume proxy) and observed spread and this finding is robust to alternative specifications.
Author: Sunil Wahal
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Category :
Languages : en
Pages :
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This paper examines the determinants and effects of entry and exit of market makers on the National Market System. Entry is associated with an increase in trading volume, a temporary increase in volatility and a permanent decline in the bid-ask spread. Exit, on the other hand, is accompanied by a small decline in volume but a permanent increase in both volatility and the spread. The spread changes are related to entry/exit, even after controlling for changes in volume and volatility. These results suggest that inter- dealer competition is successful in driving down the spread.
