The well-documented negative association between idiosyncratic volatility (IV) and stock returns is puzzling if investors are risk-averse. We show that this anomaly is also prominent in the Chinese stock market. We attempt to explain the IV anomaly by using the key theories suggested by the...

This paper provides an in depth analysis of the reference price investors apply when they decide if a security is to be kept or sold. We propose that the observed reluctance to crystallize losses and propensity to realize gains, a behavioral bias dubbed the disposition effect, may be a result of...

This study argues that a high proportion of trading through underaged accounts is likely to be controlled by informed guardians seeking to share the benefits of their information advantage with young children, or camouflaging their potentially illegal trades. Consistent with this conjecture, we...

We study the intra-day impact of algorithmic trading on the futures market to increase our understanding of algorithmic trading and its role in the price formation process. First, we find that algorithmic trading provides liquidity when the spread is wide and that algorithms enter the market at...

This paper uses a data set of 77 million trades from Finland during the period 2003 to 2009 to provide new market wide evidence on which of the two dominant investor categories, foreign institutional or domestic retail investors, contributes most to price discovery. We find foreign institutional...

This paper aims to investigate if derivatives instruments act as a substitute for short sales during periods of restriction imposed on short selling in the cash market for stocks. Contrasting the trading activity in derivative instruments to the underlying stocks, we find no evidence of a...

Institutional investors have a strong incentive to find natural counterparties to be able to trade larger amounts at lower costs. We show theoretically that order splitting allows institutional investors to gradually detect each other's trading intentions, such that they can coordinate their...

We evaluate the impact of stock market transparency and opacity design features on global trading activity, including the share of traded value for cross-listed stocks. Our methodology relies on a system of simultaneous structural equations estimated for the world's major exchanges. We find that...

The home bias in international portfolios has been explained by foreign investors' exposure to more severe moral hazard problems than domestic investors. A drop in expected returns will increase the likelihood of these hazards, causing foreign investors to react more strongly to profit warnings...

Crossed and internalised upstairs trades are analysed in a data set in which institutional investors can be identified. Earlier findings that upstairs trading is uninformed, tap into unexpressed liquidity and do not affect market quality are revisited. The permanent price effect of crossings and...