Noise Trading Transaction Costs And The Relationship Of Stock Returns And Trading Volume
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Noise Trading Transaction Costs And The Relationship Of Stock Returns And Trading Volume
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Author : Mr.Charles Frederick Kramer
language : en
Publisher: International Monetary Fund
Release Date : 1994-10-01
Noise Trading Transaction Costs And The Relationship Of Stock Returns And Trading Volume written by Mr.Charles Frederick Kramer and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994-10-01 with Business & Economics categories.
The relationship of stock returns and trading volume is the focus of much recent interest. I examine an economic model of a rational trader who operates in a market with transactions costs and noise trading. The level of trading affects the rational trader’s marginal cost of transacting; as a result, trading volume is a source of risk. This engenders an equilibrium relationship between returns and volume. The model also provides a simple way to scrutinize this relationship empirically. Empirical evidence supports the implications of the model.
Noise Trading Transaction Costs And The Relationship Of Stock Returns And Trading Volume
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Author : Charles Kramer
language : en
Publisher:
Release Date : 2006
Noise Trading Transaction Costs And The Relationship Of Stock Returns And Trading Volume written by Charles Kramer and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
The relationship of stock returns and trading volume is the focus of much recent interest. I examine an economic model of a rational trader who operates in a market with transactions costs and noise trading. The level of trading affects the rational trader`s marginal cost of transacting; as a result, trading volume is a source of risk. This engenders an equilibrium relationship between returns and volume. The model also provides a simple way to scrutinize this relationship empirically. Empirical evidence supports the implications of the model.
Informative Trading Or Just Noise An Analysis Of Currency Returns Market Liquidity And Transaction Costs In Proximity Of Central Bank Interventions
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Author : Paolo Pasquariello
language : en
Publisher:
Release Date : 2009
Informative Trading Or Just Noise An Analysis Of Currency Returns Market Liquidity And Transaction Costs In Proximity Of Central Bank Interventions written by Paolo Pasquariello and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
We study the impact of Central Bank intervention on the process of price formation in currency markets. We use a unique dataset of tick-by-tick indicative quotes posted by dealers on Reuters terminals and of intraday sterilized spot interventions and customer transactions executed on behalf of the Swiss National Bank (SNB) on the Swiss Franc/U.S. Dollar exchange rate (CHFUSD) between 1986 and 1998. We find that potentially informative SNB interventions (but not ex post uninformative customer transactions), although small relative to daily trading volumes in the CHFUSD market, had significant and persistent (albeit asymmetric, depending on their sign) effects on daily currency returns, especially when (relatively) large in magnitude, expected by the market, or inconsistent with existing momentum. The market did not anticipate the occurrence of incoming interventions un-less if chasing the trend. The SNB was much less successful in smoothing fluctuations of the currency, for daily CHFUSD volatility always surged in proximity of interventions, as did average absolute and proportional spreads. Decomposition of estimated absolute spread shocks also reveals that SNB actions induced misinformation among market participants, impacted trading immediacy, and increased market liquidity and competition among dealers. Many of these changes translated into higher transaction costs borne by the population of investors.
Noise Trading On The London Stock Exchange
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Author :
language : en
Publisher:
Release Date : 1996
Noise Trading On The London Stock Exchange written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1996 with categories.
Market Microstructure Theory
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Author : Maureen O'Hara
language : en
Publisher: John Wiley & Sons
Release Date : 1998-03-06
Market Microstructure Theory written by Maureen O'Hara and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998-03-06 with Business & Economics categories.
Written by one of the leading authorities in market microstructure research, this book provides a comprehensive guide to the theoretical work in this important area of finance.
Strategic Asset Allocation
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Author : John Y. Campbell
language : en
Publisher: OUP Oxford
Release Date : 2002-01-03
Strategic Asset Allocation written by John Y. Campbell and has been published by OUP Oxford this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002-01-03 with Business & Economics categories.
Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.
Predictability Of Stock Market Prices
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Author : Clive William John Granger
language : en
Publisher:
Release Date : 1970
Predictability Of Stock Market Prices written by Clive William John Granger and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1970 with Random walks (Mathematics). categories.
Liquidity And Asset Prices
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Author : Yakov Amihud
language : en
Publisher: Now Publishers Inc
Release Date : 2006
Liquidity And Asset Prices written by Yakov Amihud and has been published by Now Publishers Inc this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Business & Economics categories.
Liquidity and Asset Prices reviews the literature that studies the relationship between liquidity and asset prices. The authors review the theoretical literature that predicts how liquidity affects a security's required return and discuss the empirical connection between the two. Liquidity and Asset Prices surveys the theory of liquidity-based asset pricing followed by the empirical evidence. The theory section proceeds from basic models with exogenous holding periods to those that incorporate additional elements of risk and endogenous holding periods. The empirical section reviews the evidence on the liquidity premium for stocks, bonds, and other financial assets.
Market Liquidity
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Author : Thierry Foucault
language : en
Publisher: Oxford University Press
Release Date : 2023
Market Liquidity written by Thierry Foucault and has been published by Oxford University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with Capital market categories.
"The process by which securities are traded is very different from the idealized picture of a frictionless and self-equilibrating market offered by the typical finance textbook. This book offers a more accurate and authoritative take on this process. The book starts from the assumption that not everyone is present at all times simultaneously on the market, and that participants have quite diverse information about the security's fundamentals. As a result, the order flow is a complex mix of information and noise, and a consensus price only emerges gradually over time as the trading process evolves and the participants interpret the actions of other traders. Thus, a security's actual transaction price may deviate from its fundamental value, as it would be assessed by a fully informed set of investors. The book takes these deviations seriously, and explains why and how they emerge in the trading process and are eventually eliminated. The authors draw on a vast body of theoretical insights and empirical findings on security price formation that have come to form a well-defined field within financial economics known as "market microstructure." Focusing on liquidity and price discovery, the book analyzes the tension between the two, pointing out that when price-relevant information reaches the market through trading pressure rather than through a public announcement, liquidity may suffer. It also confronts many striking phenomena in securities markets and uses the analytical tools and empirical methods of market microstructure to understand them. These include issues such as why liquidity changes over time and differs across securities, why large trades move prices up or down, and why these price changes are subsequently reversed, and why we observe temporary deviations from asset fair values"--
Working Paper Summaries Wp 94 77 Wp 94 147
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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 1995-02-01
Working Paper Summaries Wp 94 77 Wp 94 147 written by International Monetary Fund and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995-02-01 with Business & Economics categories.
Authors of Working Papers are normally staff members of the Fund or consultants, although on occasion outside authors may collaborate with a staff member in writing a paper. The views expressed in the Working Papers or their summaries are, however, those of the authors and should not necessarily be interpreted as representing the views of the Fund. Copies of individual Working Papers and information on subscriptions to the annual series of Working Papers may be obtained from IMF Publication Services, International Monetary Fund, 700 19th Street, Washington, D.C. 20431. Telephone: (202) 623-7430 Telefax: (202) 623-7201 This compilation of summaries of Working Papers released during July-December 1994 is being issued as a part of the Working Paper series. It is designed to provide the reader with an overview of the research work performed by the staff during the period.