Search results
1 – 10 of over 14000Steffen Volkenand, Guenther Filler and Martin Odening
The purpose of this paper is to investigate and compare the impact of order imbalance on returns, liquidity and price volatility in agricultural futures markets on an intraday…
Abstract
Purpose
The purpose of this paper is to investigate and compare the impact of order imbalance on returns, liquidity and price volatility in agricultural futures markets on an intraday basis. The authors examine whether order imbalance is more powerful to explain variations in asset prices compared to other indicators of trading activity, particularly trading volume.
Design/methodology/approach
Using Chicago Mercantile Exchange best bid best offer data, the impact of order imbalance is analyzed via regression analyses. The analyses are carried out for corn, wheat, soy, live cattle and lean hogs in March 2008 and March 2016.
Findings
Results confirm the positive relation between order imbalance and returns as well as between order imbalance and price volatility as suggested by market microstructure models. Order imbalance, however, does not generally outperform trading volume as an explanatory variable.
Practical implications
For some contracts, returns can be predicted using lagged order imbalance. This offers the opportunity to derive profitable trading strategies.
Originality/value
This paper is one of the first attempts to explore the relationship between order imbalance and returns, liquidity and volatility for agricultural commodity futures on an intraday basis, accounting for the increased trading volume and for the high speed at which new information enters the market in an electronic trading environment.
Details
Keywords
Nikhil Rastogi, V.N. Reddy and Kiran Kumar Kotha
The purpose of this paper is to study the empirical relationship between order imbalance and returns in the backdrop of structural changes in the Indian market.
Abstract
Purpose
The purpose of this paper is to study the empirical relationship between order imbalance and returns in the backdrop of structural changes in the Indian market.
Design/methodology/approach
The study makes use of hypothesis testing and dummy variable regression to investigate the relationship between order imbalance and returns during the period 1999‐2005, which saw definitive change in the structure of the Indian markets.
Findings
Order imbalance (buying or selling pressure) has significantly reduced post the structural reforms at the daily as well as intra‐day intervals across trade, as well as value measures of order imbalance. After controlling for the number of transactions, order imbalance and return correlations have fallen in the post‐2002 period as compared to the pre‐2002 period, at daily as well as intra‐day intervals. Further, after controlling for past high and low returns, order imbalance exhibits day of the week effect in the pre‐2002 period while no such effect is seen in the post‐2002 period.
Originality/value
The work brings out order imbalance and returns relationship for the Indian market, which has different structure from that of many developed, as well as developing, markets in the backdrop of changes in its own structure. This would provide a richer literature in the area of market structure and design.
Details
Keywords
Andrew Lepone, Reuben Segara and Brad Wong
This study investigates whether broker anonymity impairs the ability of the market to detect informed trading in the lead up to takeover announcements. Our research represents the…
Abstract
This study investigates whether broker anonymity impairs the ability of the market to detect informed trading in the lead up to takeover announcements. Our research represents the first study in this area to analyse the effects of broker anonymity in the context of significant information asymmetry. Results indicate that informed traders are less detected, and therefore better off when broker identifiers are concealed. This finding has important policy implications for exchange officials deciding whether or not to reveal broker identifiers surrounding trades, especially considering that almost all prior research suggests that broker anonymity is correlated with improved liquidity.
Details
Keywords
Pia Bandyopadhyay, James Hackard and Yiuman Tse
The purpose of this paper is to examine the pre‐ and post‐split behavior for trades and quotes of iShare exchange‐traded funds (ETFs) that split in June 2005. The objective is to…
Abstract
Purpose
The purpose of this paper is to examine the pre‐ and post‐split behavior for trades and quotes of iShare exchange‐traded funds (ETFs) that split in June 2005. The objective is to determine whether post‐split changes in the bid‐ask spread, trade turnover, average dollar‐size trade, frequency of small trades, trade price location, and order imbalance support either or both of the two widely examined hypotheses for the motivation for share splits.
Design/methodology/approach
The impact of the iShares split around the split date was studied, using the measures above to examine the support, if any, for each of two hypotheses, broker promotion and/or the trading inconvenience, with regard to the sample and time period under study.
Findings
Bid‐ask spread, average dollar order size, and frequency of small trades were found to fail to reject the broker‐promotion hypothesis, while the increase in post‐split turnover fails to reject the trading‐inconvenience hypothesis. Changes in the trade‐price‐location parameter and in order imbalance fail to support either hypothesis.
Practical implications
Because of the importance of basket securities in the determination of the prices for listed securities, issuers of these securities, investors and regulators should be interested whether the price behavior of splitting iShares is similar to that experienced in other securities.
Originality/value
Numerous studies in the literature have investigated the effects of stock splits on individual securities, but it is believed, none has yet appeared studying the recent splits in iShares.
Details
Keywords
Rhea Tingyu Zhou and Rose Neng Lai
Motivated by the unique characteristics and profit generating nature of real estate investments, this paper aims to study if investors herd differently in corresponding securities…
Abstract
Purpose
Motivated by the unique characteristics and profit generating nature of real estate investments, this paper aims to study if investors herd differently in corresponding securities versus other non‐real estate securities.
Design/methodology/approach
The authors choose the Hong Kong stock market to form the sample to distinguish the herd behavior of the property stocks, if any, from stocks of other categories. The authors separate stocks into two portfolios, those made up of property stocks versus non‐property stocks, because it is widely known that property stocks have high market volatility and domination of institutional investors.
Findings
The authors find a persistent and significant smaller herding in property stocks. The result of a reverse U‐shape intraday herding pattern also provides a possible clue to previous studies of a U‐shape in intraday volatility pattern. The authors document that recent announcements of an increase in the short‐term interest rate have an additive effect on the herd behavior of market participants in trading property stocks. Lastly, on the conjecture that herding will further exemplify price instability arising from positive feedback trading while investors engage in positive feedback trading in both property stocks and non‐property stocks, such activity in the latter group lasts for a longer period. Furthermore, price instability of property stocks disappears at a faster pace than the counterpart.
Originality/value
This study shows that property stocks are more efficiently traded by investors than other types of stocks, at least in the Hong Kong stock market.
Details
Keywords
Glenn Kit Foong Ho, Sirimon Treepongkaruna and Chaiyuth Padungsaksawasdi
This paper examines whether short sellers aggravate volatility in the Australian stock market by using five different realized volatility (RV) measures during a more stable period.
Abstract
Purpose
This paper examines whether short sellers aggravate volatility in the Australian stock market by using five different realized volatility (RV) measures during a more stable period.
Design/methodology/approach
The authors develop a measure to capture the abnormal level of short selling for each stock and examine the bivariate and trivariate dynamic relationships between abnormal short selling and five volatility measures: the RV, continuous and jump components of RV, upside and downside volatilities.
Findings
Overall, the findings indicate a weak association between abnormal short selling and volatility. Where the relationships are significant, the authors generally find that lagged abnormal short selling is negatively associated with both upside and downside volatilities. In general, short selling does not drive or amplify the decline in stock prices.
Originality/value
This paper contributes to existing literature in various aspects. First, the authors offer evidence on the relationship between abnormal short selling and volatility in a general market condition while existing studies often found mixed results of the effects of short selling on volatility around extreme events. Second, the authors add to the literature on the volume-volatility relation by introducing abnormal short selling. Although abnormal short volume does not supplant the number of trades in the volume-volatility relation, it has some incremental, albeit negative, effect on volatility. Finally, the study provides further evidence for the debate on the desirability of short sellers in financial markets.
Details
Keywords
This study aims to investigate – theoretically and empirically – if call auctions incorporate asymmetric information into prices.
Abstract
Purpose
This study aims to investigate – theoretically and empirically – if call auctions incorporate asymmetric information into prices.
Design/methodology/approach
First, this study introduces a new model of price formation in a call auction with insider information. In this call auction model, insider trading gives rise to an asymmetric information component of transaction costs. Next, this study estimates the model using 20 stocks from Euronext Paris and investigates if the asymmetric information component is present.
Findings
The theoretical analysis reveals that call auctions incorporate asymmetric information into prices. The empirical analysis finds strong evidence for the asymmetric information component. Testable implications provide further support for the model.
Practical implications
Call auctions have recently been proposed as an alternative to continuous limit order book markets to overcome problems associated with high-frequency trading. However, it is still an open question whether call auctions efficiently aggregate asymmetric information. The findings of this study imply that call auctions facilitate price discovery and, therefore, are a viable alternative to continuous limit order book markets.
Originality/value
There is no generally accepted measure of trading costs for call auctions. Therefore, the measure introduced in this study is of great value to anyone who wants to quantify trading costs in call auctions, understand the determinants of trading costs in call auctions or compare trading costs and their components between continuous markets and call auctions. This study also contributes to the literature devoted to estimating the probability of information-based trading.
Details
Keywords
– The purpose of this paper is to explore the impact of institutional trading on the market quality during the financial crisis and short sale ban.
Abstract
Purpose
The purpose of this paper is to explore the impact of institutional trading on the market quality during the financial crisis and short sale ban.
Design/methodology/approach
The following methods was applied to discuss the total impact on market quality and efficiency of short sale ban in USA from 2001 to 2010. The author examined institutional ownership and breadth of ownership while performing a mean variance tests for changes in efficiency as well as multivariate analysis.
Findings
Analyzing USA, Standard and Poor’s 500 stocks the author find increase high-low volatility, realized volatility, effective spread and relative quoted spread during January 1, 2007 to December 31, 2010. Realized volatility increases for both small and large quantile stocks. High-low volatility increases for small quantile stocks and relative quoted spread increases for large quantile stocks. Comparing the percentage change between pre and climax period we find that large quantile stocks have a negative association between breadth of institutional ownership and returns and a positive relation high-low volatility, realized effective spread and quoted spread to returns.
Originality/value
The present paper is the first to discuss the total impact on market quality and efficiency of short sale ban in USA from 2001 to 2010. The author find a remarkable improvement in market efficiency (variance ratios) after the crisis period for small and non-financial stocks, while the price efficiency lost during the crisis period is more persistent for large and financial stocks.
Details
Keywords
To capture the last hour momentum over the intraday session, the authors develop a trading strategy for the exchange-traded fund (ETF) that is effective because of the T+0 trading…
Abstract
Purpose
To capture the last hour momentum over the intraday session, the authors develop a trading strategy for the exchange-traded fund (ETF) that is effective because of the T+0 trading rule. This strategy generates annualized excess return of 9.673%.
Design/methodology/approach
In this study, the authors identify a last hour momentum pattern in which the sixth (seventh) half-hour return predicts the next half-hour return by employing high frequency 2012–2017 data from the China Securities Index (CSI) 300 and its ETF.
Findings
Overall, both the predictability and the trading strategy are statistically and economically significant. In addition, the strategy performs more strongly on high volatility days, high trading volume days, high order-imbalance days and days without economic news releases than on other days.
Originality/value
Noise trading, late-information trading, infrequent rebalancing and disposition effects from retail investors may account for this phenomenon.
Details
Keywords
Abhinava Tripathi, Vipul and Alok Dixit
This study aims to provide a systematic literature review of the research study in the area of limit order book (LOB) mechanism of trading and its implications for market…
Abstract
Purpose
This study aims to provide a systematic literature review of the research study in the area of limit order book (LOB) mechanism of trading and its implications for market efficiency. The study attempts to document the recent theoretical developments and empirical findings from the literature exhaustively and identifies the research gaps for future research.
Design/methodology/approach
The study uses seven reputable databases to select 2,514 research studies spanning over 1981-2018 (finally compressed to a pool of 103 articles, based on relevance and impact). The study uses bibliometric network visualization and text analytics to categorize and examine the literature. The chosen articles are compiled and analyzed to provide a comprehensive account of the current research on LOBs.
Findings
The recent LOB literature is summarized on various criteria as follows: sub-areas, the types of economies and markets, methodologies and the LOB measures. The review identifies a dearth of studies on the LOBs in emerging markets. It suggests the potential research areas as intraday studies in emerging LOB markets; application of market indicators based on deeper levels of LOB, beyond the best prices; market fragmentation, order routing decision and its impact on order execution quality; optimal display of LOB levels; liquidity dynamics in quote-driven markets vis-à-vis LOB markets; effect of high-frequency trading on market microstructure; application of advanced techniques (e.g. machine learning models, zero-intelligent models); relationship between the trading speed, order aggressiveness, shape and resilience of the order book and informed trading; and information content of the auxiliary order submission strategies, including cancellation, amendments and hidden orders.
Originality/value
For the past 15 years, to the best of the knowledge, a comprehensive review of the literature on LOBs has not been published. The financial markets have transformed significantly over this period, driven by the adoption of LOBs, low latency trading and technological advancements in information dissemination. This article provides an extensive collection and classification of the literature on LOBs. This would be useful for the practitioners, future researchers and academics in the area of financial markets.
Details