Location Matters: An Examination of Trading Profits

The electronic trading system Xetra of the German Security Exchange provides a unique data source on the equity trades of 756 professional traders located in 23 different cities and eight European countries. We explore informational asymmetries across the trader population: Traders located outside Germany in non-German-speaking cities show lower proprietary trading profit. Their underperformance is not only statistically significant, it is also of economically significant magnitude and occurs for the 11 largest German blue-chip stocks. We also examine whether a trader location in Frankfurt as the financial center, or local proximity of the trader to the corporate headquarters of the traded stock, or affiliation with a large financial institution results in superior trading performance. The data provide no evidence for a financial center advantage or of increasing institutional scale economies in proprietary trading. However, we find evidence for an information advantage due to corporate headquarters proximity for high-frequency (intraday) trading.     

The Effect of Option Listing on Bid-Ask Spreads,Price Volatility,and Trading Activity of the Underlying OTC Stocks

This paper examines the changes in spreads, price volatility, and trading activity surrounding option listing for a sample of 144 OTC stocks. For this sample, both price volatility and volume increase, but the evidence on spreads is mixed. The increase in price volatility is attributed primarily to an increase in residual return variances. Furthermore, price volatility increases even after controlling for volume, insider trading, and spreads. Although these variables do not fully explain the causes for the increase in price volatility after option listing, the results suggest that liquidity trading or volume has a stronger effect on price volatility than insider trading. This study also finds that both the number of trades and institutional holdings show substantial increases, which are supportive of the notion that listing of options on OTC stocks attracts more attention.     

The Effectiveness of Technical Trading for Arab Stocks

In this paper, we examine the profitability of technical analysis for a cross section of individual Arab stocks. Our analysis, undertaken from the perspective of an Islamic investor, reveals that technical trading rules do not yield economically or statistically significant returns. While our results uncover some scant statistical evidence of technical trading rule profitability, risk adjusting the returns weakens the evidence in favor of predictability. Furthermore, break-even transaction costs do not exceed estimated transaction costs or bid-ask spreads in the markets examined.     

Insider Trading and Option Grant Timing in Response to Fire Sales (and Purchases) of Stocks by Mutual Funds

Mutual funds experiencing large outflows (inflows) tend to decrease (expand) their positions, creating downward (upward) price pressure in the stocks held in common by them ( Coval and Stafford [2007] ). This study shows that corporate insiders exploit the resulting mispricing by buying (selling) their company's stock if it is subject to such fire sales (purchases) by funds. We also show that the likelihood of option grants is greater for stocks that are subject to mutual fund fire sales. Finally, we show that both the insider trading and the option granting activities help speed up the correction of the flow‐driven mispricing. Overall, this study illustrates that insiders enhance personal benefits by trading on their personal account and influencing the timing of option grants in response to mispricing due to flow‐driven fund trading. Moreover, these activities help improve the informational efficiency of stock price.     

库藏股制度与证券交易秩序

上市公司回购自己股份，关系到公司的资本结构和资本总量，而且会影响投资人的投资判断，因此，在公司回购自己股份并持有库藏股的过程中，应该注意股份回购与股东间机会平等，以及如何维持证券交易公正的问题。     

The Dog That Did Not Bark: Insider Trading and Crashes

This paper documents that at the individual stock level, insiders' sales peak many months before a large drop in the stock price, while insiders' purchases peak only the month before a large jump. We provide a theoretical explanation for this phenomenon based on trading constraints and asymmetric information. A key feature of our theory is that rational uninformed investors may react more strongly to the absence of insider sales than to their presence (the “dog that did not bark” effect). We test our hypothesis against competing stories, such as insiders timing their trades to evade prosecution.     

Making Sense of Cents: An Examination of Firms That Marginally Miss or Beat Analyst Forecasts

This paper examines the performance consequences of cutting discretionary expenditures and managing accruals to exceed analyst forecasts. We show that firms that just beat analyst forecasts with low quality earnings exhibit a short-term stock price benefit relative to firms that miss forecasts with high quality earnings. This trend, however, reverses over a 3-year horizon. Additionally, firms reducing discretionary expenditures to beat forecasts have significantly greater equity issuances and insider selling in the following year, consistent with managers understanding the myopic nature of their actions. Our results confirm survey evidence suggesting managers engage in myopic behavior to beat benchmarks.     

The Day-of-the-Week and the Week-of-the-Month Effects: An Analysis of Investors' Trading Activities

This study examines the positive Monday returns detected in the stock market during the 1988–1998 period and finds that (a) the positive Monday returns are concentrated in the first and the third weeks of the month, and (b) they are related to the increasing trading activities of institutional investors.     

融资融券对标的股票波动性的影响——来自中国A股市场的证据

通过以A股市场所有融资融券标的股票作为研究对象,划分五个研究窗口和四个指数板块,分别采用面板数据回归的方法,研究融资融券对标的股票波动性的影响。实证结果表明,融资融券对标的股票波动性的影响随行情变化而变:在非暴涨暴跌行情中,融资减小标的股票的波动,融券增大或减小标的股票的波动,但因为融资的影响更大,所以融资融券减小标的股票的波动;在暴涨暴跌行情中,融资融券加剧标的股票的波动。     

知情交易概率测算在内幕交易监管中的应用

内幕交易定义侧重信息分布状态,知情交易定义侧重信息认知状态,在立法和监管层面,内幕交易包含知情交易的内涵。信息优势是内幕交易监管困境的根源所在,知情交易概率模型从是否拥有信息的两种不同交易行为模式出发．有助于判断潜在的内幕交易行为,根据选取时间段变量、事件变量和财务指标变量的不同,为内幕交易监管选取重点目标提供参考。在监管实务操作中。强化信息核心、改革收盘机制、主张模糊界定等是必要的手段。     

Differences of Opinion of Public Information and Speculative Trading in Stocks and Options

We analyze the effects of differences of opinion on the dynamicsof trading volume in stocks and options. We find that disagreementsabout the mean of the current- and next-period public informationlead to trading in stocks in the current period but have noeffect on options trading. Without options, we find that disagreementsabout the precision of all past and current public informationaffect trading in stocks in the current period. With options,only disagreements about the precisions of the next- and current-periodinformation affect stocks and options trading in the currentperiod. Our results suggest that options trading is concentratedaround information events that are likely to cause disagreementsamong investors, whereas trading in stocks may be diffusiveover many periods.     

Return Predictability of Turkish Stocks: An Empirical Investigation

Employing the portfolio method and cross-sectional regressions, this paper provides a comprehensive analysis of stock return predictability in Turkey from January 1997 to July 2011. In the risk-related predictors, we found predictive power for beta, total volatility, and idiosyncratic volatility. The "cheapness" variable, book-to-market ratio, is the most important return predictor for the stocks traded on the Istanbul Stock Exchange (now part of the Borsa Istanbul). Grouping the stocks as small and large according to the median value of the market capitalization of the stocks adds important insights to the analysis. Our results show the set of large stocks on the Istanbul Stock Exchange to be the least predictable set of stocks.     

The Making of a Dealer Market: From Entry to Equilibrium in the Trading of Nasdaq Stocks

This paper provides an analysis of the nature and evolution of a dealer market for Nasdaq stocks. Despite size differences in sample stocks, there is a surprising consistency to their trading. One dealer tends to dominate trading in a stock. Markets are concentrated and spreads are increasing in the volume and market share of the dominant dealer. Entry and exit are ubiquitous. Exiting dealers are those with very low profits and trading volume. Entering market makers fail to capture a meaningful share of trading or profits. Thus, free entry does little to improve the competitive nature of the market as entering dealers have little impact. We find, however, that for small stocks, the Nasdaq dealer market is being more competitive than the specialist market.     

股票期权激励的福利性特征界定及探索

股票期权激励往往被上市公司管理层利用,作为向管理层输送利益的工具,这反映了资本市场和公司治理的不足。更为重要的,股票期权激励本身就带有福利性特征,这一特征在不完善的资本市场可能被放大。本文提出股票期权"福利化"概念,并对股票期权"福利化"进行了分类界定,且在此基础上指出了股票期权激励在行权价格和业绩标准方面存在"理想状态",这是界定股票期权激励性质的关键。     

The Informational Role of Option Trading Volume in Equity Index Options Markets

This paper examines the dynamic relations between future price volatility of the S&P 500 index and trading volume of S&P 500 options to explore the informational role of option volume in predicting the price volatility. The future volatility of the index is approximated alternatively by implied volatility and by EGARCH volatility. Using a simultaneous equation model to capture the volume-volatility relations, the paper finds that strong contemporaneous feedbacks exist between the future price volatility and the trading volume of call and put options. Previous option volumes have a strong predictive ability with respect to the future price volatility. Similarly, lagged changes in volatility have a significant predictive power for option volume. Although the volume-volatility relations for individual volatility and volume terms are somewhat different under the two volatility measures, the results on the predictive ability of volume (volatility) for volatility (volume) are broadly similar between the implied and EGARCH volatilities. These findings support the hypothesis that both the information- and hedge-related trading explain most of the trading volume of equity index options.     

An Event Option Pricing Model with Scheduled and Unscheduled Announcement Effects

There is considerable evidence supporting the time-varying distribution of asset returns. There is also ample evidence that scheduled announcement events such as money supply announcements (in the case of foreign exchange), earnings announcements (in the case of stocks), and crop reports (in the case of commodities), as well as random unscheduled events, can affect the level and volatility of asset returns. This study provides an Event Model for European call options which explicitly addresses effects of these two classes of events. This specification requires estimation of more parameters, but it could provide a more accurate basis for pricing options than previous Poisson jump-diffusion models. Parametric analysis shows that the standard models under price the options relative to the Event Model. The Event Model may be particularly useful in pricing short-term deep out-of-the-money options when scheduled events are present in the market.     

Ex-Day Behavior: Tax or Short-Term Trading Effects

This study examines the behavior of share prices around the ex-dividend dates before and after the introduction of the 1988 Income and Corporation Taxes Act that reduced substantially the tax differential between dividends and capital gains in the United Kingdom. We find that, in the pre-1988 period when the differential taxation of dividends and capital gains is high, ex-day returns are positive and significant. In contrast, in the post-1988 period, ex-day returns are, in most cases, negative and insignificant. Further analysis reveals that, while ex-day returns are significantly related to dividend yield and to the length of the settlement period, they are not affected by the commonly used measures of transaction costs, such as the bid-ask spread and trading volume, or by the day of week, month of the year, type of dividend distribution, or number of days to the actual receipt of the cash dividend. We conclude that taxation affects significantly ex-day share prices in the United Kingdom.