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Author : Frank J. Sensenbrenner
Publisher :
ISBN 13 :
Total Pages : 460 pages
Book Rating : 4.:/5 (877 download)
Download or read book Three Essays on Informed Trading written by Frank J. Sensenbrenner and published by . This book was released on 2011 with total page 460 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Frank Sensenbrenner
Publisher :
ISBN 13 :
Total Pages : 230 pages
Book Rating : 4.:/5 (13 download)
Download or read book Three Essays on Informed Trading written by Frank Sensenbrenner and published by . This book was released on 2013 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays examining the behavior of informed traders in financial markets and how they affect asset pricing. It examines informed traders' role in shaping securities prices in three ways. It examines whether on a macro and micro basis insider traders move prices to a different degree than non-insiders. In addition, it uses econometric methods to determine what exchange generates permanent price trends in UK shares. Lastly, it looks at another side effect of fragmentation - how a 'best execution' mandate and related market structure changes affect transactions costs in liquid UK, French, and German shares.These studies expand on current literature in various ways - extant insider trading literature has either primarily focused on daily price movement and volume or had consisted of case studies, the conclusions of which may be idiosyncratic and therefore unrepresentative of typical insider behavior. The new phenomenon of multilateral trading facilities (also known as electronic communications networks) and the proliferation of algorithmic or computer-mediated trading had not been examined in price discovery papers, due to their relative novelty. In addition, despite a bevy of literature offering informed insight into the impact of the European Union's Markets in Financial Instruments Directive (MiFID), there has been a dearth of empirical studies assessing its impact on European securities markets. Chapters 2 and 3 examine MiFID and computerized trading from two different perspectives: that of which trades lead to permanent prices, and that of transactions costs.The conclusions drawn in this dissertation will be of interest to regulators, market operators, and traders, as they offer insight into the impact of market structure and how it impacts informed traders who participate in them.
Author : Michael James Pascutti
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (476 download)
Download or read book Three Essays in Finance: Informed Trading on NASDAQ, Contrarian Trading by Insiders, and Swap Pricing written by Michael James Pascutti and published by . This book was released on 1996 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Hamed Khadivar
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (139 download)
Download or read book Three Essays on Informed Trading written by Hamed Khadivar and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: How pervasive is informed trading around takeover rumors? This dissertation tackles this research question from three different following aspects. First, we examine insider trading surrounding takeover rumors in a sample of publicly traded U.S. firms. We find that insider net-purchases increase within the year prior to the first publication of a takeover rumor, particularly when rumor articles are either accurate (lead to a takeover announcement) or informative (provide substantial justification for the rumor's publication). Moreover, we find abnormal insider trading to be a significant predictor of takeover announcements occurring within the following year. Finally, trading patterns differ between different types of insiders in both the pre- and post-rumor periods. Second, we examine the possibility of informed institutional trading around takeover rumors. We find that pension plan sponsors and money managers are net-buyers in firms which will become subject to takeover speculation within the following seven days. This activity is significant in predicting which rumored firms will eventually receive takeover bids. Furthermore, we find that institutions on average reverse their trades and engage in significant selling on and after the rumor date, even in those firms which will become subject to a takeover announcement. Third, we investigate and quantify the pervasiveness of informed trading in the equity options of rumored takeover targets. We find that the volume of options traded is abnormally high over the 5-day pre-rumor period, primarily due to the number of out-of-the-money call options traded. In addition, the direction of option trades prior to takeover rumors predicts forthcoming takeover announcements and rumor date returns. Identifying suspicious trades, we find evidence of individuals trading on knowledge of takeover rumor candidacy in the options market. Our results further indicate that informed traders prefer the options market to the equity market.
Author : Alexei Boulatov
Publisher :
ISBN 13 :
Total Pages : 328 pages
Book Rating : 4.:/5 (34 download)
Download or read book Three Essays on Strategic Trading in Oligopolistic Economies written by Alexei Boulatov and published by . This book was released on 2004 with total page 328 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Three Essays on Market Transparency written by and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : T'ang Wen
Publisher :
ISBN 13 : 9783944791289
Total Pages : 0 pages
Book Rating : 4.7/5 (912 download)
Download or read book THREE ARTICLES ON KNOWLEDGEABLE TRADING written by T'ang Wen and published by . This book was released on 2023-03-09 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: consists of three essays and focuses on informed trading by various economic agents. The first essay provides causal evidence that compensation shocks due to missing relative performance goals prompts more opportunistic insider trading. I use a regression discontinuity design to identify the effect of missing relative performance goals on insider trading. I find that CEOs who narrowly miss relative performance goals and hence receive a lower pay earn higher abnormal profits from their insider trades subsequent to the compensation shock than otherwise similar CEOs who narrowly beat the goals. I also find that CEOs who narrowly miss relative performance goals become less likely to provide earnings and sales guidance. These results suggest that managers can use insider trading to make up for the loss in compensation due to missing relative performance goals, which could reduce the incentive effect of performance-based pay. The second essay, coauthored with Jiekun Huang, identifies the effect of the implementation of the EDGAR system on information production by market participants. Modern information technologies have fundamentally changed how information is disseminated in financial markets.
Author : Zekun Wu
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (133 download)
Download or read book Three Essays on the Information Content of Stock Options written by Zekun Wu and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays that explore the information content embedded in equity options. The results improve our understanding of the cross-section of option returns, informed trading in the options market, and the industry effect of IPOs. In the first essay, we study the relation between option-implied skewness (IS) and the crosssection of option returns under daily hedging to better understand skewness pricing in isolation from lower moments. Creating portfolios of delta-hedged (D-hedged) and delta-vega-hedged (DV-hedged) options with daily rebalancing, we find that IS is negatively (positively) related to call (put) option returns, but the relation to put options is statistically significant only during economic recessions. The relation is more substantial when the underlying stock has a larger market beta and when the firm has more severe information opacity. Our results suggest that investors' skewness preference grows stronger with greater market risk and lower information quality. In the second essay, we examined the informed trading in the options market before FDA drug advisory committee meetings. We find significant abnormal options trading volume before both meeting dates and report creation dates, particularly for small drug firms. Abnormal volume significantly predicts post-meeting stock returns. Informed traders prefer out-of-the-money options and choose maturities to cover the dates when reports are publicly released. They prefer to sell options close to the meeting date, perhaps to capture returns from both expected stock price changes and the sharp drop in implied volatility post-meeting. In the third essay, I investigate the effect of initial public offerings (IPOs) on industry competitors' options market. I find that rival firms' put (call) options volume increases (decreases) around IPOs, leading to price pressure on call options relative to put options as measured by the implied volatility spread. Rival firms' reaction in the options market also predicts the IPO firms' post-IPO stock performance. Lastly, rival firms with strong operating income experience less negative impact in the options market, suggesting competitive operation performance help stabilize rival firms' options market around IPOs.
Author : Iván Blanco
Publisher : Ed. Universidad de Cantabria
ISBN 13 : 8481028770
Total Pages : 90 pages
Book Rating : 4.4/5 (81 download)
Download or read book Three Essays in Financial Markets. The Bright Side of Financial Derivatives: Options Trading and Firm Innovation written by Iván Blanco and published by Ed. Universidad de Cantabria. This book was released on 2019-02-15 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: Do financial derivatives enhance or impede innovation? We aim to answer this question by examining the relationship between equity options markets and standard measures of firm innovation. Our baseline results show that firms with more options trading activity generate more patents and patent citations per dollar of R&D invested. We then investigate how more active options markets affect firms' innovation strategy. Our results suggest that firms with greater trading activity pursue a more creative, diverse and risky innovation strategy. We discuss potential underlying mechanisms and show that options appear to mitigate managerial career concerns that would induce managers to take actions that boost short-term performance measures. Finally, using several econometric specifications that try to account for the potential endogeneity of options trading, we argue that the positive effect of options trading on firm innovation is causal.
Author : Yubin Li
Publisher :
ISBN 13 :
Total Pages : 116 pages
Book Rating : 4.:/5 (937 download)
Download or read book Three Essays on Accounting Information and Financial Derivatives written by Yubin Li and published by . This book was released on 2015 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation comprises of three essays: 1) Accounting information and financial derivatives: a literature review 2) The Effect of Option Transaction Costs on Informed Trading in the Option Market around Earnings Announcements; and 3) The Effects of Credit Default Swaps trading on Analyst Forecast Properties. The first essay surveys the previous researches on accounting information and financial derivatives. The financial derivate instruments we mainly focus on are stock option and credit default swaps. Then we also identify some research gaps for future research. The second essay investigates the effect of transaction costs related to trading options on the directional and volatility informed trading in the option market. We find that both forms of informed trading are significantly stronger among firms with lower option bid-ask spread. Importantly, the effect of transaction costs is significant around earnings announcements, but not significant (on average) around randomly chosen dates with no events of consequence. This suggests that transaction costs play a particularly important role during information intensive periods. Trading strategies based on directional informed trading and option transaction costs earn monthly abnormal returns of 1.39% to 1.91%. The third essay investigates whether the initiation of credit default swaps (CDSs) trading can affect analysts' forecast properties. Using a difference-in-difference research design, we find that the onset of CDS trading help analysts to increase forecast accuracy, which is consistent with notion that a new financial market facilitate information discovery and dissemination. This effect is more pronounced for firms with greater information asymmetry and higher leverage. We also find that CDS initiation can depress analysts' strategic forecast optimism. Relying on several proxies for analysts' strategic optimism, we find that the depressing effect is more pronounced for subsamples with higher optimism level. In addition, we find that the depressing effect is stronger when bad news is realized ex post in the earnings announcement date.
Author : Sean Lew
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (862 download)
Download or read book Essays on Market Microstructure written by Sean Lew and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contains three essays on market microstructure. Chapter 1 studies how endogenous information acquisition affects financial markets by modelling potentially informed traders who optimally acquire variable information at increasing cost. Prices affect the informed trading by providing incentives for acquiring information. Endogenous information acquisition explains the stylised facts that informed trading and transaction volume spike after informational events and fall over time. My model also tells a cautionary tale for interpreting measures of informed trading. Three common empirical proxies derived under the exogenous assumption (spreads, Easley O'Hara's PIN and blockholder interest) do not agree with each other in my setup. Chapter 2 develops a more general framework with endogenous information acquisition which I use to examine the behaviour of an optimal monopolistic market maker. Unlike a competitive market maker, he sets prices to increase information revelation which is valuable to him. I characterise market information structure by whether narrower or wider spreads increase the information revealed by trades. An optimal monopolistic market maker may behave differently from the standard exogenous information benchmark. He may set narrower spreads in early periods. On average, spreads may widen over time. The different results arise from the interaction of a monopolistic market maker with endogenous information acquisition. Chapter 3 studies the impact of confidential treatment requests made by institutional investors to the Securities and Exchange Commission (SEC) to delay disclosure of their holdings. The SEC requires the manager to present a coherent on-going trading program in his request for confidential treatment. If granted, he is restricted to trade in a manner consistent with his reported forecast in the subsequent period. Under the restriction, the manager earns higher expected profits by applying for confidential treatment only if his probability of success exceeds a threshold. The model predicts that the price impact of a disclosed trade due to a confidential treatment request denial is greater than that of a disclosed trade where there is no request.
Author : Youngseog Park
Publisher :
ISBN 13 :
Total Pages : 218 pages
Book Rating : 4.:/5 (187 download)
Download or read book Three Essays on Trading Volume written by Youngseog Park and published by . This book was released on 1990 with total page 218 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Min Hwang
Publisher :
ISBN 13 :
Total Pages : 322 pages
Book Rating : 4.:/5 (34 download)
Download or read book Three Essays on Financial Markets written by Min Hwang and published by . This book was released on 2001 with total page 322 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : William Paul Spurlin
Publisher :
ISBN 13 :
Total Pages : 256 pages
Book Rating : 4.:/5 (775 download)
Download or read book Three Essays on Trading and Banking written by William Paul Spurlin and published by . This book was released on 2011 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays. The first essay, Short Sales in the NYSE Batch Open and NASDAQ Opening Cross, examines opening-trade short volume's relation to short volume for the rest of the trading day and to overnight, previous-day, and same-day price changes. We find that short volume in the batch open and opening cross increases with short volume for the rest of the day, with previous-day, open-to-close price changes, and with overnight price changes for S & P 500 stocks. Batch-open short volume increases with overnight price changes, and it increases (does not decrease) for firms making positive (negative) overnight earnings announcements. Opening-cross short volume increases with close-to-close, previous-day price changes and is negatively related to same-day price changes. Our second essay, Short Sales around Open-Market Repurchase Announcements, studies short selling of a firm's stock during the five days after it announces an open-market repurchase. We conclude that a firm may be able to mislead normally-informed investors about its quality by announcing an open-market repurchase. Next, we conclude that open-market repurchase size does not possess positive signaling attributes. Lastly, we conclude that short sellers do not predict the repurchasing behavior of firms announcing an open-market repurchase. The third essay, Profit Efficiency and Big Bank Presence in Rural Markets, studies the effect of big-bank presence on the profitability of rural one-market banks. We find that a small rural bank shows decreased profit efficiency and increased return on assets due to higher loan income when it competes with at least one big bank. If multiple big banks are competing with a small rural bank, the small bank shows a smaller decrease in profit efficiency and a smaller increase in return on assets due to a smaller increase in loan income than if it competes with one big bank. From these results, we conclude that big banks choose to remain in rural markets where they possess some degree of market power, enabling them to earn higher returns while operating less efficiently, but market power is restricted when more than one big bank is present in a rural market.
Author : Xiaohu Deng
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (11 download)
Download or read book Three Essays in Finance written by Xiaohu Deng and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation presents three papers that examine the real effects of market frictions such as short selling constraints, and also informed trading in put option and short selling markets. Specifically, first two essays examine the positive externalities of short selling, and paper 3 examines the informational patterns of short selling and put option trading and interactions between both trading activities. Essay 1 studies the real effects of short selling constraints on stock prices, and corporate investment. To do so, I exploit world-wide regulatory interventions to permit short selling. I find that reducing short selling constraints causes stock prices and crash risk to drop, and price efficiency to improve. Corporate investment also drops and is accompanied by a drop in debt and equity issues. Investment becomes more responsive to growth opportunities. My results suggest that short selling constraints can alleviate distortions in stock prices and corporate investment. My results are consistent with the notion that stakeholders infer information from stock prices and adjust investment accordingly. Essay 2 examines whether short selling reduces politically motivated bad news hoarding. I examine the stock price behavior of Chinese public firms around two highly visible political events - meetings of the National Congress of the Chinese Communist Party and Two Sessions (The National People’s Congress Conference and The Chinese People’s Political Consultative Conference) from 2002-2014, and find that political bad news hoarding has been reduced after short selling becomes available. I establish causality by relying on a difference-in-differences approach based on a controlled experiment of short selling regulation changes in China. I also find this reduction in bad news hoarding to be more pronounced in firms with stronger politicalconnection (higher state ownership and larger size) and higher accounting opacity, which further confirms our finding. This study sheds new light on the real effects of short sellers on political impact on capital market. Essay 3 identifies the informational patterns of short sales and option trades. Using VAR and calculating Impulse Response Functions, I find that short selling in general contains more information than put option trading, and put option trading has limited substitution effect.
Author : Yi Xue
Publisher :
ISBN 13 :
Total Pages : 294 pages
Book Rating : 4.:/5 (112 download)
Download or read book Three Essays on Market Microstructure and Financial Econometrics written by Yi Xue and published by . This book was released on 2009 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three essays that study three interdependent topics: microstructure foundation of volatility clustering, inefficiency of information diffusion and jump detection in high frequency financial time series data. Volatility clustering, with autocorrelations of the hyperbolic decay rate, is unquestionably one of the most important stylized facts of financial time series. The first essay forms Chapter 1 which presents a market microstructure model that is able to generate volatility clustering with hyperbolic autocorrelations through traders with multiple trading frequencies using Bayesian information updating in an incomplete market. The model illustrates that signal extraction, which is induced by multiple trading frequency, can increase the persistence of the volatility of returns. Furthermore, it is shown that the local temporal memory of the underlying time series of returns and their volatility varies greatly with the number of traders in the market. The second essay, Chapter 2, presents a market microstructure model showing that an increasing number of information hierarchies among informed competitive traders leads to a slower information diffusion rate and informational inefficiency. The model illustrates that informed traders may prefer trading with each other rather than with noise traders in the presence of the information hierarchies. Furthermore, it is shown that momentum can be generated from the trend following behavior pattern of noise traders. I propose a new nonparametric test based on wavelets to detect jump arrivals in high frequency financial time series data, in the third essay, Chapter 3. It is demonstrated that the test is robust for different specifications of price processes and the presence of market microstructure noise and it has good size and power. Further, I examine the multi-scale jump dynamics in U.S. equity markets and the findings are as follows. First, the jump dynamics of equities are entirely different across different time scales. Second, although arrival densities of positive jumps and negative jumps are symmetric across different time scales, the magnitude of jumps is distributed asymmetrically at high frequencies. Third, only twenty percent of jumps occur in the trading session from 9:30AM to 4:00PM, suggesting that jumps are largely determined by news rather than liquidity shocks.
Author : Osman Ulas Aktas
Publisher :
ISBN 13 :
Total Pages : 139 pages
Book Rating : 4.:/5 (111 download)
Download or read book Three Essays on the Microstructure of the BIST written by Osman Ulas Aktas and published by . This book was released on 2016 with total page 139 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three essays. The first essay (chapter 2) examines the accuracy of five algorithms for classifying trades as buyer- or seller-initiated for BIST-30 index constituents over a period including the Lehman collapse. The highest classification accuracy rate (over 95%) is for the one-second lagged Lee & Ready (LR) algorithm. The LR’s classification accuracy is highest (lowest) for trades representing mixed agency and principal (pure principal) relations between clients and executing brokers. Unlike for U.S. markets, almost all trades are classifiable with accuracy rates of 90-plus percent for both long and short trades. As for U.S. markets, higher misclassification rates occur for trades in the first versus last 30 minutes of the trading day, as the time between consecutive trades decreases, and for decreasing trade sizes. The second essay (chapter 3) examines the trade price effects and their determinants for BIST-30 index constituents for a period that includes the Global Financial Crisis and the Lehman collapse. Consistent with theoretical predications, we find that informed trades in the BIST tend to be large. Our findings that price discovery appears to be fairly rapid on the BIST and that the average multi-sample stock trade price effect of less than 30 basis points is competitive with other markets have important implications for the purchase and execution decisions of investors. Our finding of positive mean price effects for short trades that are larger for seller-initiated trades and larger than for long trades has implications for the ongoing debate about the regulation of short sales since it suggest that the average short sales does not depress prices. Furthermore, the higher price effects of (especially buyer-initiated) trades in the last minutes of a trading session and the variation in price effects with whether the client-broker relationship is agency, principal or mixed have important implications for market regulators in terms of refining their surveillance systems to better control any inappropriate stealth trading or end-of-session price manipulation. The third essay (chapter 4) examines the price-limit hits for members of the BIST-50 index during the March 2008 through March 2009 period. The effects of price-limits are not homogeneous for upper and lower hits when they occur and if they continue in a subsequent trading session. Our results are supportive of the no-, dampening and spillover effects on volatility hypotheses, overreaction and no-effect price hypotheses, magnet price effect hypothesis, and greater informational asymmetric effect on market-quality hypothesis. They are not supportive of the price-delay hypothesis, and trading interference hypothesis. The results are robust using equi-distant and trade-by-trade returns and volatility measures ccounting for the autocorrelations in these return series. The results have implications for regulators contemplating the introduction of similar mechanisms or fine-tuning their current mechanisms.
