Testing weak-form market efficiency: Evidence from the Istanbul Stock Exchange

The random-walk version of the efficient market hypothesis is tested for the Istanbul Stock Exchange (ISE) using its composite, industrial, and financial index weekly closing prices. The results obtained from three of the tests indicate that all three series are a random walk, but a nonparametic test provides some evidence against a random walk.     

Stock prices and the flow of information in the Athens Stock Exchange

The paper investigates the dynamics of price changes and information flow to the market in the Athens Stock Exchange in Greece using daily data over the period 1988 to 1993. A generalised autoregressive conditional heteroskedastic (GARCH) model in stock returns is shown to reflect time dependence in the process generating information flow to the market. Using daily trading volume or value as proxies for information flow, we find them to be significant in explaining the variance of daily returns and to reduce GARCH effects substantially. This has implications for the informational efficiency of the market.     

投资者分歧、异常交易量和股票横截面收益率预测——基于中国股票市场的经验证据

本文定义月度异常交易量为本月与上个月交易金额的比值,发现中国市场月度收益率与滞后一个月的异常交易量显著负相关。在控制了公司规模、账面市值比、流动性以及动量效应等指标后仍然具有显著的解释作用。进一步研究表明,在出现高异常交易量后的12个月内,换手率和特质性波动率都有大幅上升。本文认为,交易量上升代表着市场分歧程度和受关注程度的增加,在卖空约束下会使得股票价值高估,从而造成未来收益率下降。     

Non-scheduled news arrival and high-frequency stock market dynamics: Evidence from the Australian Securities Exchange

An increasing number of market participants utilise news analytics software to comprehend the large amounts of unstructured data flowing through news-wires. Utilising original data from one such tool – Ravenpack – I examine the market reaction of leading Australian stocks to stock-specific news flow over an extended period. Unconditional analysis of key variables around 484,440 news items reveals distinct responses in market activity, volatility, bid-ask spreads and returns. The study confirms previous literature such that indicated relevance of news items is critical when identifying significant effects. In addition, the reaction of market activity, volatility and spreads is greatest for negative news. The findings are confirmed when controlling for market dynamics and cross-dependencies between variables in a high-frequency VAR model.     

Interdependence and Volatility Spillovers Under Market Liberalization: The Case of Istanbul Stock Exchange

This paper analyzes stock returns and volatility relations between the Istanbul Stock Exchange (ISE) and the global market as represented by stock markets in the US, the UK, Japan and Germany. Results from monthly data and multivariate cointegration tests suggest that the ISE became significantly integrated in the global market only in the period following market liberalization in late 1989. We also find evidence based on GARCH estimations that capital liberalization actually mitigated, rather than intensified, volatility in the ISE. Our results further suggest that the Asian crisis in mid‐1997 and the consequent Russian economic meltdown in mid‐1998 are partly responsible for the recent excessive volatility in the Turkish market. The results also identify the US and the UK markets as dominate sources of volatility spillovers for the ISE, even in the period following the Asian‐Russian crises. Consequently, it appears that the two matured markets of the US and the UK shoulder significant responsibility for the stability and financial health of smaller emerging markets like the ISE.     

Price Limits and Stock Market Volatility in the Athens Stock Exchange

In this paper, we have examined the effects of price limits on the stock volatility in the Athens Stock Exchange. We put forward two hypotheses, the information hypothesis, which implies that price limits only slow down the process of adjustment and have no effect on stock volatility; and the over-reaction hypothesis, which assumes that investors tend to overreact to new information, so that price limits give them time to reassess the information and reduce stock volatility. Our results show strong support for the information hypothesis. This evidence is obtained by performing the tests on ten stocks, which include heavily traded stocks as well as less active stocks, and covering a variety of industries, and on a market wide price index. The results are also robust to the frequency of the measurement of the returns, and to the tightness of the limits.     

汇率与股价关联的实证研究——基于汇改后中国大陆、台湾、香港的数据

通过运用协整检验和格兰杰因果检验对汇率制度改革后中国大陆、台湾、香港的股市与汇市关系的实证结果表明,中国大陆汇市与股市存在长期稳定的协整关系,短期相互影响明显;台湾汇市与股市只存在短期的相互效应;香港数据表明两者不存在因果关系,但方差分解显示股市变动对汇率波动有一定的冲击效应.     

Trade Transparency and the London Stock Exchange

On the London Stock Exchange the publication of large trades is delayed to give the market-maker concerned time to unwind the change in their inventory. Using trade and quotations data on 42 stocks for two years, a number of different effects are investigated. These include the association between trade size and the traded bid-ask spread, the inventory control policies of individual market-makers around large trades, the size and speed of the price impact of large trades whose publication is delayed, and the effects of delayed publication on the volume and spreads of the traded equity options market.     

The Proof of the Pudding: The Effects of Increased Trade Transparency in the London Stock Exchange

The trade publication rules of the London Stock Exchange were changed on 1 January, 1996, to increase transparency. This paper investigates whether these changes affected market behaviour by examining data on 60 firms from the FTSE 100, FTSE Mid 250 and the FTSE Small Cap indices before and after this rule change. This study finds there has been a major increase in transparency, with no detrimental effects on the quality of the market. In particular, neither the volume nor the traded bid-ask spread has been adversely affected.     

Stock market dependence in crisis periods: Evidence from oil price shocks and the Qatar blockade

This paper examines the correlation and the dependence patterns of the Qatar stock market with other markets using copula statistical theory and exploiting new datasets covering the period August 1998 to June 2018. To examine the crisis –specific change in the average degree of dependence we decomposed the data into the time periods before and after oil price shocks and the 2017 political crisis among the Gulf Cooperation Council members (i.e. the Qatari blockade). Our findings from the static copula modelling show that the correlations between the Qatari and the other stock markets significantly change after the oil price and the blockade crisis as well. The degree of change in the correlation is time varying and differs from county-group to another. Moreover, our findings reveals that the 2008 global financial crisis has a stronger impact than the price shocks and political crisis. The findings of the paper are of interest and allow for formulating a reliable and dynamic portfolio design framework for investors and risk managers.     

The explanatory power of trading volume and insider activity in a pari-mutuel betting market

In this paper, we examine the role played by the holders of privileged information (insiders) in stimulating trading volume which adds explanatory power to a price-based model of returns in a market where the actions of insiders can be isolated – a pari-mutuel betting market. We conduct conditional logit analyses based on data relating to 19,164 horses running in 2078 races (49 racetracks) staged across the UK between 1 June and 31 August 1996. These analyses indicate that prices generally fail to incorporate fully information contained in trading volumes. However, the betting public fully discounts volume information in markets most commonly viewed as attracting bets from insiders. Isolation of the actual degree of insider activity sheds light on the variation in volume effects.     

Financial constraints and asset pricing: comprehensive evidence from London Stock Exchange

This study provides comprehensive evidence on the pricing of financial constraints (FC) risk on London Stock Exchange during the period 1988–2013. Utilizing a large number of proxies for FC, we find that investors are not compensated with higher premia for holding shares of financially constrained firms. To the contrary, in most of the cases, the most constrained firms significantly underperform, both statistically and economically, the least constrained ones. Focussing on the Whited–Wu index to construct a zero-cost FC factor that goes long the most constrained firms and sells short the least constrained ones, we find that this factor carries a significantly negative premium and it is priced in the cross-section over and above the commonly used risk factors.     

汇率与股价：基于世界模型的分析框架

本文从世界模型的角度,阐述世界均衡的特点,初步建立有关汇率和本国股票市场、外国股票市场的函数形式,从而为研究汇率与股价之间的价格互动机制的奠定理论基石。     

Nasdaq and The Chicago Stock Exchange: An Analysis of Multiple Market Trading

We analyze a set of 97 NASD-listed securities that trade on both the Nasdaq and Chicago Stock Exchange (CHX) to determine if trading costs and price improvement differ between the two markets. We find that order execution costs, which we define by the traded spread and the signed effective half-spread, are significantly lower on the CHX. This difference is consistent over trade types and for trades of at least 1,000 shares. Also, we find that trades occurring on the CHX receive more price improvement than do those occurring on Nasdaq.     

The effect of settlement regimes on trading cost and market efficiency: evidence from the National Stock Exchange

Using data from 65 of the most actively traded stocks from the National Stock Exchange of India we study the relationship between impact cost and three indicators of market efficiency under different settlement regimes. Our data is uniquely suited for this study because it encompasses a transition by the National Stock Exchange of India from fixed to rolling settlement. As a by-product of our study we are able to examine inefficiencies related to the day of the week on which trades are conducted for different settlement regimes. In summary our data reveals that rolling settlement reduces aggregate impact costs, leading to greater market efficiency. Employing a fixed effects model we show that impact cost has a stronger relationship to our indicators of market efficiency under rolling settlement. However, we find evidence of two structural inefficiencies related to the day-of-the-week on which trades are conducted: 1) under rolling settlement, trades conducted earlier in the week (and settled by Thursday) have lower impact costs, and 2) there is an impact cost premium for Friday trades.     

Trading performance and market efficiency: Evidence from algorithmic trading

In India, National Stock Exchange directly identifies algorithmic trading participation. Algorithmic traders possess intraday market timing skills. Results are not motivated by extreme short-term signals or transitory price trading. Magnitude of market timing performance in cross-sectional group of traders shows that they earn profit across all the cases, and maximize while providing liquidity. Volume-weighted-average-price decomposition analysis reports algorithmic traders earn profits through intraday market timing performance for five-minute and one-minute intervals, and it is higher compared to short-term market timing performance across all trader groups. Order imbalance and price delay regressions show that algorithmic trading significantly improves price efficiency.     

Trading profitability from learning and adaptation on the Tokyo Stock Exchange

This study proposes unexamined technical trading rules, which are dynamically switching strategies among filter, moving average and trading-range breakout rules. The dynamically switching strategy is formulated based on a discrete choice theory consistent with the concept of myopic utility maximization. We utilize the transaction data of the individual stocks listed on the Nikkei 225 from September 1, 2005 to August 31, 2007. We demonstrate that switching strategies produce positive returns and their performance is better than those from the buy-and-hold and non-switching strategies over our sample periods. We also demonstrate equivalent performance for switching with different learning horizons, implying that behavioural heterogeneity of stock investors arises from the coexistence of different strategies with varying degrees of learning horizons. Our result supports several research assumptions and results on agent-based theoretical models that successfully replicate empirical features in financial markets, such as fat tails of return distributions and volatility clustering. However, upon considering the effects of data-snooping bias superior performance disappears.     

Machine learning sentiment analysis,COVID-19 news and stock market reactions

The recent COVID-19 pandemic represents an unprecedented worldwide event to study the influence of related news on the financial markets, especially during the early stage of the pandemic when information on the new threat came rapidly and was complex for investors to process. In this paper, we investigate whether the flow of news on COVID-19 had an impact on forming market expectations. We analyze 203,886 online articles dealing with COVID-19 and published on three news platforms (MarketWatch.com, NYTimes.com, and Reuters.com) in the period from January to June 2020. Using machine learning techniques, we extract the news sentiment through a financial market-adapted BERT model that enables recognizing the context of each word in a given item. Our results show that there is a statistically significant and positive relationship between sentiment scores and S&P 500 market. Furthermore, we provide evidence that sentiment components and news categories on NYTimes.com were differently related to market returns.     

Stock splits to profit insider trading: Lessons from an emerging market

Stock splits have long presented financial puzzles: Why are they undertaken? Why are they associated with abnormal returns? Abnormal returns, particularly those coming shortly before a split’s announcement date, should raise strong suspicions of insider trading, particularly in nations with weak regulatory structures. We examined the 718 split events in the emerging stock market of Vietnam from 2007 through 2011. We found evidence consistent with illegal insider trading, particularly in firms that were vulnerable to insider manipulation and, therefore, more likely to split their stocks. When vulnerable firms’ stocks did split, they provided significant excess short-term returns. Tellingly, the abnormal returns on those stocks prior to the split announcements were also extremely high, indeed higher than their abnormal post-announcement returns. Moreover, trading volume increased prior to the split announcement date. This suspicious pattern is what we would expect if insiders were trading on their knowledge. We propose that illegal insider trading in contexts where it is possible to escape serious penalty provides a previously undiscussed and cogent explanation for both stock splits and abnormal short-term returns.     

Stock Market Volatility in an Emerging Market: Further Evidence from the Athens Stock Exchange

We investigate the time series properties of the daily and weekly returns from the Athens Stock Exchange (ASE) index for the years 1987 to 1997. We investigate whether important time-series characteristics have changed significantly over time. The Greek market has recently undergone major changes including complete capital flow liberalization, the implementation of computerized trading, as well as significant increases in market volume and capitalization; we thus contrast the 1987–90 and 1991–97 periods. Our findings suggest the dynamics of the ASE composite index returns have changed as the market has developed.