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on Market Microstructure |
| By: | Alexis Stenfors (Portsmouth Business School); Masayuki Susai (Nagasaki University); ; |
| Abstract: | This paper studies the frequency and speed of limit order cancellations in the FX spot market for three categories of currency pairs. The first category includes the three most actively traded currency pairs (EUR/USD, USD/JPY and EUR/JPY), which have been at the forefront of algorithm trading. The second category includes two smaller G10 currency pairs (EUR/SEK and EUR/NOK) and the third category (USD/MXN, USD/RUB and USD/TRY) includes three of the most actively traded emerging market currencies. By investigating both market-specific and order-specific drivers of liquidity withdrawal, we report several findings that could serve to question traditional market microstructure theory as well as conventional ‘market wisdom’ with regards to trading behaviour on electronic trading platforms. |
| Keywords: | market microstructure, limit order book, foreign exchange, high-frequency trading, algorithmic trading |
| JEL: | D4 F3 |
| Date: | 2017–06–14 |
| URL: | http://d.repec.org/n?u=RePEc:pbs:ecofin:2017-06&r=mst |
| By: | Gwilym, Owain Ap; Wang, Qvigwei; Hasan, Iftekhar; Xie, Ru |
| Abstract: | Using a novel proxy of investors' speculative demand constructed from online search interest in "concept stocks", we examine how speculative demand affects the returns and trading volume of Chinese stock indices. We find that returns and trading volume increase with the contemporaneous speculative demand. In addition, the high speculative demand causes lower near future returns, while recent high past returns cause the high speculative demand. Moreover, the speculative demand explains more variation in returns and trading volume of A shares (more populated by retail investors) than B shares (less populated by retail investors). Our findings support the attention theory of Barber and Odean (2008). Keywords: Investor Attention, Speculative Demand, Concept Stock, Market Returns, Trading Volume JEL: G02, G12, G14 |
| JEL: | G02 G12 G14 |
| Date: | 2016–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:2013_010&r=mst |
| By: | Mateusz Wilinski; Yuichi Ikeda; Hideaki Aoyama |
| Abstract: | We propose a novel approach that allows to calculate Hilbert transform based complex correlation for unevenly spaced financial data. This method is especially suitable for high frequency data, which are of a particular interest in finance. Its most important feature is the ability to take into account lead-lag relations on different levels, without knowing them in advance. We also present results obtained with this approach while working on Tokyo Stock Exchange intraday quotations. We show that individual sectors and subsectors tend to form important market components which may follow each other with small but significant delays. These components may be recognized by analysing eigenvectors of complex correlation matrix for Nikkei 225 stocks. |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1706.06355&r=mst |
| By: | Efraim Benmelech; Nittai K. Bergman |
| Abstract: | Credit market freezes in which debt issuance declines dramatically and market liquidity evaporates are typically observed during financial crises. In the financial crisis of 2008-09, the structured credit market froze, issuance of corporate bonds declined, and secondary credit markets became highly illiquid. In this paper we analyze liquidity in bond markets during financial crises and compare two main theories of liquidity in markets: (1) asymmetric information and adverse selection, and (2) heterogenous beliefs. Analyzing the 1873 financial crisis as well as the 2008-09 crisis, we find that when bond value deteriorates, bond illiquidity increases, consistent with an adverse selection model of the information sensitivity of debt contracts. While we show that the adverse-selection model of debt liquidity explains a large portion of the rise in illiquidity, we find little support for the hypothesis that opinion dispersion explains illiquidity in financial crises. |
| JEL: | G01 G12 G21 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23512&r=mst |
| By: | Marco Di Maggio; Francesco Franzoni; Amir Kermani; Carlo Sommavilla |
| Abstract: | This paper shows that the network of relationships between brokers and institutional investors shapes the information diffusion in the stock market. We exploit trade-level data to show that central brokers gather information by executing informed trades, which is then leaked to their best clients. We show that after large informed trades, a significantly higher volume of other institutional investors execute similar trades through the same broker, allowing them to capture higher returns in the first few days after the initial trade. In contrast, we find that when the informed asset manager is affiliated with the broker, such imitation does not occur. Similarly, we show that the clients of the broker employed by activist investors to execute their trades tend to buy the same stocks just before the filing of the 13D. This evidence also suggests that an important source of alpha for fund managers is the access to better connections rather than superior skill. |
| JEL: | G12 G14 G24 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23522&r=mst |