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Author: Anna Obizhaeva
Publisher:
ISBN:
Category :
Languages : en
Pages : 165
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(cont.) For instance, the price impact coefficients relate positively to the market capitalization and to the amount of noise trading; they increase during buy "packages" and decrease during sell "packages"; finally, total price impact is concave in trade size, fitting well the square-root specification, however, surprisingly, its permanent component is also non-linear. In the last chapter, based on joint work with Jiang Wang, we study how security prices affect trading strategies. The supply/demand of a security in the market is an intertemporal, not a static, object and its dynamics is crucial in determining market participants' trading behavior. We show that the dynamics of the supply/demand, rather than its static properties, is of critical importance to the optimal trading strategy of a given order. Using a limit-order-book market, we develop a simple framework to model the dynamics of supply/demand and its impact on execution cost. We demonstrate that the optimal execution strategy involves both discrete and continuous trades, not only continuous trades as previous work suggested. The cost savings from the optimal strategy over the simple continuous strategy can be substantial. We also show that the predictions about the optimal trading behavior can have interesting implications on the observed behavior of intraday volume, volatility and prices.
Author: Anna Obizhaeva
Publisher:
ISBN:
Category :
Languages : en
Pages : 165
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Book Description
(cont.) For instance, the price impact coefficients relate positively to the market capitalization and to the amount of noise trading; they increase during buy "packages" and decrease during sell "packages"; finally, total price impact is concave in trade size, fitting well the square-root specification, however, surprisingly, its permanent component is also non-linear. In the last chapter, based on joint work with Jiang Wang, we study how security prices affect trading strategies. The supply/demand of a security in the market is an intertemporal, not a static, object and its dynamics is crucial in determining market participants' trading behavior. We show that the dynamics of the supply/demand, rather than its static properties, is of critical importance to the optimal trading strategy of a given order. Using a limit-order-book market, we develop a simple framework to model the dynamics of supply/demand and its impact on execution cost. We demonstrate that the optimal execution strategy involves both discrete and continuous trades, not only continuous trades as previous work suggested. The cost savings from the optimal strategy over the simple continuous strategy can be substantial. We also show that the predictions about the optimal trading behavior can have interesting implications on the observed behavior of intraday volume, volatility and prices.
Author: Siu Kai Choy
Publisher:
ISBN: 9780494777688
Category :
Languages : en
Pages :
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Book Description
Author: Cuyler Lawrence Strong
Publisher:
ISBN:
Category : Options (Finance)
Languages : en
Pages : 141
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Book Description
These two essays demonstrate the important role that derivative markets play in assimilating information into financial markets. In the first essay I use the 2008 short-selling ban to examine the impact of single-stock futures (SSFs) trading on options market quality. I show that there is a substitution effect between options trading and SSFs trading during the ban period. In addition, my results show that SSFs trading had a significant effect in narrowing the bid-ask spreads of options contracts. Moreover, compared to stocks without SSFs, stocks with SSFs were less likely to violate put-call parity during the ban period. My results suggest that SSFs trading helps mitigate the negative effect of the short-selling ban on options market quality documented in the literature.In the second essay I look at information flows through large option trades. The motivation comes from CNBC's "Halftime Report" which regularly covers unusual option activity, i.e., those abnormally large trades, and recommend investors to follow the "smart money". I investigate the impact of the CNBC coverage on underlying stock prices and whether investors can indeed profit by following the "smart money". I document an immediate spike in trading volume and abnormal returns at the time of the CNBC coverage, and evidence that the unusual option trades are informative of stock prices around the coverage. However, I also document a significant reversal in underlying stock prices following the CNBC coverage. Using the same criteria advocated by the CNBC commentators, I identify unusual option activities for a large sample of stocks without CNBC coverage. I confirm that the unusual option trades significantly predict underlying stock returns, but find no evidence of reversal in underlying stock prices. My findings suggest that the CNBC coverage of unusual option activity has a destabilizing effect on underlying stock prices and investors cannot profit by simply following the CNBC reporting on the "smart money".
Author: Robert Giffen
Publisher: Legare Street Press
ISBN: 9781021417091
Category :
Languages : en
Pages : 0
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Book Description
An insightful study of the stock market and the factors that drive changes in the value of securities. This book provides a detailed analysis of fluctuations in stock prices, offering valuable insights for investors and traders. This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work is in the "public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.
Author: Yiyu Shen
Publisher:
ISBN:
Category : Capital market
Languages : en
Pages : 162
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Book Description
This dissertation contains three parts that study the behavior of security prices in financial markets. The first part presents a novel method to model certain risk factors which impact on only certain groups of stocks instead of all stocks in the market. We call this kind of factors 'unique factors'. This allows us to have a parsimonious structure for individual stock returns. As a result, we find that a multifactor model with two common factors and two unique factors have superior explanatory power both in and out-of-sample than models with common factors. Moreover, we find that the explanatory power of the unique factors has increased over the past forty years. This is in a sharp contrast to the declining explanatory power of common factors.
Author: Minder Cheng
Publisher:
ISBN:
Category :
Languages : en
Pages : 246
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Author: Ye Lu (Ph. D.)
Publisher:
ISBN:
Category :
Languages : en
Pages : 85
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Book Description
(cont.) In particular, I consider a greedy policy, which involves at each stage buying a quantity that drives the temporary price to the security safety price. I show that the greedy policy is not always optimal and provide conditions under which the greedy policy is optimal. I also provide bounds on the performance of the greedy policy relative to the performance of the optimal policy.
Author: Sir Robert Giffen
Publisher: Rarebooksclub.com
ISBN: 9781230129303
Category :
Languages : en
Pages : 42
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Book Description
This historic book may have numerous typos and missing text. Purchasers can usually download a free scanned copy of the original book (without typos) from the publisher. Not indexed. Not illustrated. 1879 edition. Excerpt: ...a period extending from the close of last century to the present time, the evidence being the more valuable from its being adduced at first incidentally to support conclusions as to the effect of bank-note circulation on prices, and vice versd. There is also a French authority on the subject of very great weight--M. Clement Juglar, whose able book on Crises Commerciales deals not only with the commercial cycle in England, but extends our range of view to other Continental countries and the United States, showing the universality of the causes at work and their deep root in human nature. Another authority is Professor Stanley Jevons, who shows in his book on the gold discoveries and their effect on prices the necessity of disregarding or allowing for the cyclical changes so as to bring out the more permanent changes which may be considered attributable to the gold discoveries. More recently Mr. Bagehot in his Lombard Street has given his suffrage for the same view, supporting it by a special reference to the remarkable rise of prices in 1869-71. Mr. Bagehot's special object was to explain the periodical excitement of the money market, but his evidence consists mainly of the great movement of prices. Mr. Bagehot's explanation of the reason of the cycle generally appears also a sufficient one. His theoiy is, that a cycle of prosperity begins by something happening to favour a particular trade. Something occurs to make the products of that trade greatly in demand; all those who are in it make greater profits than before; these profits make them stronger and larger purchasers from other trades, which in turn become more profitable, and so by action and reaction trades A, B, C, and D, and so on, all through the letters of the alphabet, are...
Author: Sougata Das
Publisher:
ISBN: 9781339034133
Category : Debt financing (Corporations)
Languages : en
Pages : 120
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Book Description
During the last decade there have been significant changes in market structure as well as in the regulatory framework. New regulations require firms to disclose more information in a timely manner. Simultaneously, quantum improvements in computer networks have increased the speed of information flows and facilitated explosive growth in trading volume. In light of such changes, I examine three important questions regarding how security pricing has responded to recent changes in market frictions. Given the rise of automated trading in the post-decimalization era, we examine time trends in price clustering for exchange traded funds (ETFs) and individual stocks during 2001 - 2010. There is limited prior evidence on price clustering for portfolio securities such as ETFs. A striking feature of the evidence is the substantial reduction in clustering over the sample period for ETFs as well as for individual stocks. This decline occurs for trades of all sizes. We attribute the decline in clustering to the increasing prominence of algorithmic trading, which is immune to psychological biases. The second chapter examines the impact of a firm's disclosure patterns on its cost of debt. Using data on current report (Form 8-K) filings, we examine firms' information disclosure behavior prior to debt issuances and the resultant impact on the cost of debt capital. We find that firms increase their current report filing frequency as the debt issuance approaches; this tendency is more pronounced for public debt issues compared to private debt issues. Among public debt issuers, the increase in disclosure is greater for high-yield debt versus investment-grade debt. Analysis of yield spreads of high-yield debt reveals that more disclosure reduces the cost of debt. These results further suggest that debt issuing firms find current report filing as an economic and useful way to improve the information environment. Finally, chapter three investigates stock market reactions to 8-K reports filed under the new regime in the specific context of acquisitions of privately held target firms by public acquirers. This paper finds that 8-K disclosures filed by public acquirers have a material impact on the pricing and the trading of the acquirers' shares around the event date and the SEC filing dates. Further, we find that this impact is economically significant even for targets classified as "insignificant" by the SEC. We find no significant effects related to the pre-event information transparency of the acquirer.
Author: Orkunt Mesut Dalgic
Publisher:
ISBN:
Category : Investments
Languages : en
Pages : 348
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Book Description
