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on Market Microstructure |
| By: | Van Horen, Neeltje; Schmukler, Sergio L.; Yeyati, Eduardo Levy |
| Abstract: | Whereas conventional wisdom argues that markets shut down during crises, with sellers struggling to find buyers, we find that markets continue to operate during financial turmoil, even in narrow and volatile emerging economies. Simple event studies indicate that both trading volume and trading costs increase in crisis times. Prices change more with each dollar transacted (pushing the Amihud illiquidity measure up) a nd bid-ask spreads widen. More generally, econometric estimates show that large price downturns, typical of crises, are associated with higher trading activity and increased trading costs, with trading activity declining only later as crises progress. Thus, while trading activity tends to be negatively related to trading costs during tranquil times (and across securities), this relation appears to break down during crises. These results are consistent with the analytical literature on portfolio rebalancing by heterogeneous agents in times of crises. |
| Keywords: | Debt Markets,Markets and Market Access,Emerging Markets,,Economic Theory & Research |
| Date: | 2007–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4445&r=mst |
| By: | Bock, David (Statistical Research Unit, Department of Economics, School of Business, Economics and Law, Göteborg University); Andersson, Eva (Statistical Research Unit, Department of Economics, School of Business, Economics and Law, Göteborg University); Frisén, Marianne (Statistical Research Unit, Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | Financial trading rules have the aim of continuously evaluating available information in order to make timely decisions. This is also the aim of methods for statistical surveillance. Many results are available regarding the properties of surveillance methods. We give a review of financial trading rules and use the theory of statistical surveillance to find properties of some commonly used trading rules. In addition, a nonparametric and robust surveillance method is proposed as a trading rule. Evaluation measures used in statistical surveillance are compared with those used in finance. The Hang Seng Index is used for illustration. |
| Keywords: | Trading rules; Hidden Markov model; Filter rule; Moving average; Statistical surveillance |
| JEL: | C10 |
| Date: | 2007–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunsru:2007_008&r=mst |