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on Market Microstructure |
| By: | Yuko Hashimoto; Takatoshi Ito; Takaaki Ohnishi; Misako Takayasu; Hideki Takayasu; Tsutomu Watanabe |
| Abstract: | Using tick-by-tick data of the dollar-yen and euro-dollar exchange rates recorded in the actual transaction platform, a "run" -- continuous increases or decreases in deal prices for the past several ticks -- does have some predictable information on the direction of the next price movement. Deal price movements, that are consistent with order flows, tend to continue a run once it started i.e., conditional probability of deal prices tend to move in the same direction as the last several times in a row is higher than 0.5. However, quote prices do not show such tendency of a run. Hence, a random walk hypothesis is refuted in a simple test of a run using the tick by tick data. In addition, a longer continuous increase of the price tends to be followed by larger reversal. The findings suggest that those market participants who have access to real-time, tick-by-tick transaction data may have an advantage in predicting the exchange rate movement. Findings here also lend support to the momentum trading strategy. |
| JEL: | F31 F33 G15 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14160&r=mst |
| By: | Paul Asquith; Rebecca Oman; Christopher Safaya |
| Abstract: | This paper demonstrates that short sales are often misclassified as buyer-initiated by the Lee-Ready and other commonly used trade classification algorithms. This result is due in part to regulations which require short sales be executed on an uptick or zero-uptick. In addition, while the literature considers "immediacy premiums" in determining trade direction, it ignores the often larger borrowing premiums which short sellers must pay. Since short sales constitute approximately 30% of all trade volume on U.S. exchanges, these results are important to the empirical market microstructure literature as well as to measures that rely upon trade classification, such as the probability of informed trading (PIN) metric. |
| JEL: | G10 G12 G18 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14158&r=mst |
| By: | Marc Vorsatz; Helena Veiga |
| Abstract: | We show by means of a laboratory experiment that the relaxation of short–selling constraints causes the price of both an overvalued and an undervalued asset to decrease. Hence, the aggregation of information by the market price becomes better in case the asset is overvalued but worse if the asset is undervalued. With respect to payoffs, we find that not only uninformed but also some of the imperfectly informed traders suffer from the weakening of short–selling constraints. |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdaddt:2008-26&r=mst |