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Author: Shmuel Baruch
Publisher:
ISBN:
Category :
Languages : en
Pages : 63
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Book Description
Stock prices incorporate less “news” before negative events than positive events. Further, we find evidence that informed agents use less price aggressive (limit) orders before negative events and more price aggressive (market) orders before positive events ("buy-sell asymmetry"). Motivated by these patterns, we model the execution risk that informed agents impose on each other and relate the asymmetry to costly short selling. When investor base is narrow, security borrowing is difficult, or the magnitude of the event is small, buy-sell asymmetry is pronounced and price discovery before negative events is lower. Overall, informed agents' strategies influence the process of price formation in financial markets, as predicted by theory.
Author: Shmuel Baruch
Publisher:
ISBN:
Category :
Languages : en
Pages : 63
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Book Description
Stock prices incorporate less “news” before negative events than positive events. Further, we find evidence that informed agents use less price aggressive (limit) orders before negative events and more price aggressive (market) orders before positive events ("buy-sell asymmetry"). Motivated by these patterns, we model the execution risk that informed agents impose on each other and relate the asymmetry to costly short selling. When investor base is narrow, security borrowing is difficult, or the magnitude of the event is small, buy-sell asymmetry is pronounced and price discovery before negative events is lower. Overall, informed agents' strategies influence the process of price formation in financial markets, as predicted by theory.
Author: Worapong Janyangyuen
Publisher:
ISBN:
Category :
Languages : en
Pages : 39
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Book Description
The paper examines the price whether the foreign investors are informed traders by investigating the degree of the contribution to price discovery classified by the size of the stocks. Our results show that the foreign investors account for a majority of price discovery in spite of less number of deal volume and deal value traded by the foreign investors. The information share estimates for foreign investors range from 30 percent to 68 percent which is higher than the information share of the local customers. After controlling for the volume traded and the number of transactions traded, the information share exhibits higher degree of price discovery from the foreign investors.
Author: Heather Elise Tookes
Publisher:
ISBN:
Category :
Languages : en
Pages : 592
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Book Description
Author: Qin Emma Wang
Publisher:
ISBN:
Category :
Languages : en
Pages : 38
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Book Description
This paper investigates price discovery between control shares (the superior voting class) and public shares (the inferior voting class) issued by 62 dual-class firms around 148 quarterly earnings announcements from January 2002 to June 2008. We document substantial informed trading in both control and public shares. The average price discovery of control shares is 46.6% for positive events and 40.5% for negative events during the event periods. In addition, before the earnings announcements, abnormal trading volume and price discovery increase significantly in control shares relative to public shares. We find price discovery of control shares increases with relative volume of control shares to public shares and relative bid-ask spread but decreases with relative institutional ownership and relative volatility. Our results suggest that publicly traded superior voting class contributes to price discovery substantially, especially before earnings announcements when the information asymmetry is high. The listing of control shares not only enhances price efficiency, but also provides opportunities for outside sophisticated investors to get voting rights and engage in monitoring. Our study sheds new light on the issues of price discovery and corporate governance of dual-class firms.
Author: Yuxin Sun
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
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Book Description
Using high frequency data from the London Stock Exchange (LSE), we investigate the relationship between informed trading and the price impact of block trades on intraday and inter-day basis. Price impact of block trades is stronger during the first hour of trading; this is consistent with the hypothesis that information accumulates overnight during non-trading hours. Furthermore, private information is gradually incorporated into prices despite heightened trading frequency. Evidence suggests that informed traders exploit superior information across trading days, and stocks with lower transparency exhibit stronger information diffusion effects when traded in blocks, thus informed block trading facilitates price discovery.
Author: Deniz Ozenbas
Publisher: Springer Nature
ISBN: 3030748170
Category : Business enterprises
Languages : en
Pages : 111
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Book Description
This open access book addresses four standard business school subjects: microeconomics, macroeconomics, finance and information systems as they relate to trading, liquidity, and market structure. It provides a detailed examination of the impact of trading costs and other impediments of trading that the authors call rictions It also presents an interactive simulation model of equity market trading, TraderEx, that enables students to implement trading decisions in different market scenarios and structures. Addressing these topics shines a bright light on how a real-world financial market operates, and the simulation provides students with an experiential learning opportunity that is informative and fun. Each of the chapters is designed so that it can be used as a stand-alone module in an existing economics, finance, or information science course. Instructor resources such as discussion questions, Powerpoint slides and TraderEx exercises are available online.
Author: Lawrence Kryzanowski
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper investigates the price discovery process around exchange-initiated trading halts using 30 minute trade intervals on the Montreal Exchange. Trading halt price discovery, and regulatory and specialist effectiveness differ over the three time periods studied. Volatility and measures of trade activity increase significantly around trading halts, and return to lower levels in less than two days after the resumption of trading. The number of trades is a good measure of the information flow associated with informed trading pre-halt and the price discovery process post-halt.
Author: Frank de Jong
Publisher: Cambridge University Press
ISBN: 1139478443
Category : Business & Economics
Languages : en
Pages : 209
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Book Description
The analysis of the microstructure of financial markets has been one of the most important areas of research in finance and has allowed scholars and practitioners alike to have a much more sophisticated understanding of the dynamics of price formation in financial markets. Frank de Jong and Barbara Rindi provide an integrated graduate level textbook treatment of the theory and empirics of the subject, starting with a detailed description of the trading systems on stock exchanges and other markets and then turning to economic theory and asset pricing models. Special attention is paid to models explaining transaction costs, with a treatment of the measurement of these costs and the implications for the return on investment. The final chapters review recent developments in the academic literature. End-of-chapter exercises and downloadable data from the book's companion website provide opportunities to revise and apply models developed in the text.
Author: Marco Klapper
Publisher: Anchor Academic Publishing (aap_verlag)
ISBN: 3954896729
Category : Business & Economics
Languages : en
Pages : 70
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Book Description
This study examines the kind of information ‘informed’ traders have prior to a takeover announcement using options of target firms and elaborates on the cross-sectional relationship between options and stocks around takeover announcements. Financial markets are driven by information and by individuals that generate, process, and disclose this information to the market. Naturally, there have to be individuals who possess more information about a firm or a future event than other market participants. Mergers and acquisitions are particularly interesting events in this regard because they can have significant implications for the firms and stakeholders involved, as well as for the competitive dynamics in the respective market. Because of the large potential price impact of such transactions, traders with private information about a prospective takeover are expected to trade on this information to make a profit. But who are these ‘informed traders’ and what kind of information do they possess? This study tries to give a respond to this question.
Author: Martin D. D. Evans
Publisher: Princeton University Press
ISBN: 1400838843
Category : Business & Economics
Languages : en
Pages : 561
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Book Description
A comprehensive and in-depth look at exchange-rate dynamics Variations in the foreign exchange market influence all aspects of the world economy, and understanding these dynamics is one of the great challenges of international economics. This book provides a new, comprehensive, and in-depth examination of the standard theories and latest research in exchange-rate economics. Covering a vast swath of theoretical and empirical work, the book explores established theories of exchange-rate determination using macroeconomic fundamentals, and presents unique microbased approaches that combine the insights of microstructure models with the macroeconomic forces driving currency trading. Macroeconomic models have long assumed that agents—households, firms, financial institutions, and central banks—all have the same information about the structure of the economy and therefore hold the same expectations and uncertainties regarding foreign currency returns. Microbased models, however, look at how heterogeneous information influences the trading decisions of agents and becomes embedded in exchange rates. Replicating key features of actual currency markets, these microbased models generate a rich array of empirical predictions concerning trading patterns and exchange-rate dynamics that are strongly supported by data. The models also show how changing macroeconomic conditions exert an influence on short-term exchange-rate dynamics via their impact on currency trading. Designed for graduate courses in international macroeconomics, international finance, and finance, and as a go-to reference for researchers in international economics, Exchange-Rate Dynamics guides readers through a range of literature on exchange-rate determination, offering fresh insights for further reading and research. Comprehensive and in-depth examination of the latest research in exchange-rate economics Outlines theoretical and empirical research across the spectrum of modeling approaches Presents new results on the importance of currency trading in exchange-rate determination Provides new perspectives on long-standing puzzles in exchange-rate economics End-of-chapter questions cement key ideas
