New Economics Papers
on Market Microstructure
Issue of 2007‒07‒20
two papers chosen by
Thanos Verousis

  1. Safe Haven Currencies By Paul Söderlind; Angelo Ranaldo
  2. Caught On Tape: Institutional Trading, Stock Returns, and Earnings Announcements By Campbell, John Y; Ramadorai, Tarun; Schwartz, Allie

  1. By: Paul Söderlind; Angelo Ranaldo
    Abstract: We study high-frequency exchange rate movements over the sample 1993-2006. We document that the (Swiss) franc, euro, Japanese yen and the pound tend to appreciate against the U.S. dollar when (a) S&P has negative returns; (b) U.S. bond prices increase; and (c) when currency markets become more volatile. In these situations, the franc appreciates also against the other currencies, while the pound depreciates. These safe haven properties of the franc are visible for different time granularities (from a few hours to several days), during both "ordinary days" and crisis episodes and show some non-linear features.
    Keywords: high-frequency data, crisis episodes, non-linear effects
    JEL: F31 G15
    Date: 2007–05
  2. By: Campbell, John Y; Ramadorai, Tarun; Schwartz, Allie
    Abstract: Many questions about institutional trading can only be answered if one can track high-frequency changes in institutional ownership. In the U.S., however, institutions are only required to report their ownership quarterly in 13-F filings. We infer daily institutional trading behaviour from the “tape”, the Transactions and Quotes database of the New York Stock Exchange, using a sophisticated method that best matches quarterly 13-F data. We find that daily institutional trades are highly persistent and respond positively to recent daily returns but negatively to longer-term past daily returns. Institutional trades, particularly sells, appear to generate short-term losses - possibly reflecting institutional demand for liquidity - but longer-term profits. One source of these profits is that institutions anticipate both earnings surprises and post-earnings-announcement drift. These results are different from those obtained using a standard size cutoff rule for institutional trades.
    Keywords: earnings announcements; institutions; liquidity; post-earnings-announcement-drift; trading
    JEL: G12 G14
    Date: 2007–07

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