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Liquidity, market efficiency and the influence of noise traders : quasi-experimental evidence from the betting industry
Flepp, Raphael; Nüesch, Stephan; Franck, Egon - 2013
This paper examines how liquidity affects market efficiency in a market environment where securities' true values are … source of exogenous variation in liquidity. The results show that liquidity significantly decreases market efficiency for … weekends than on weekdays, our results indicate that the type of liquidity matters for market efficiency …
Persistent link: https://www.econbiz.de/10010363066
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Another look at trading costs and short-term reversal profits
de Groot, Wilma; Huij, Joop; Zhou, Weili - In: Journal of Banking & Finance 36 (2012) 2, pp. 371-382
Several studies report that abnormal returns associated with short-term reversal investment strategies diminish once trading costs are taken into account. We show that the impact of trading costs on the strategies’ profitability can largely be attributed to excessively trading in small cap...
Persistent link: https://www.econbiz.de/10010577945
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Liquidity provision and stock return predictability
Hendershott, Terrence; Seasholes, Mark S. - In: Journal of Banking & Finance 45 (2014) C, pp. 140-151
This paper examines the trading behavior of two groups of liquidity providers (specialists and competing market makers … market-wide measure of liquidity. A double sort using past trades of specialists and competing market makers produces a long …-short portfolio that earns 88 basis points per week (act as complements). Finally, we identify a “chain” of liquidity provision …
Persistent link: https://www.econbiz.de/10011065626
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Individual Investors and Volatility
Foucault, Thierry; Sraer, David; Thesmar, David - C.E.P.R. Discussion Papers - 2008
We test the hypothesis that individual investors contribute to the idiosyncratic volatility of stock returns because they act as noise traders. To this end, we consider a reform that makes short selling or buying on margin more expensive for retail investors relative to institutions, for a...
Persistent link: https://www.econbiz.de/10005114244
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Chapter 15 Anomalies and market efficiency
Schwert, G. William - 2003
Anomalies are empirical results that seem to be inconsistent with maintained theories of asset-pricing behavior. They indicate either market inefficiency (profit opportunities) or inadequacies in the underlying asset-pricing model. After they are documented and analyzed in the academic...
Persistent link: https://www.econbiz.de/10014023856
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Predicting the unpredictable : forecastable bubbles and business cycles under rational expectations
Gracia, Eduard - 2012
A popular interpretation of the Rational Expectations/Efficient Markets hypothesis states that, if it holds, market valuations must follow a random walk; hence, the hypothesis is frequently criticized on the basis of empirical evidence against such a prediction. Yet this reasoning incurs what we...
Persistent link: https://www.econbiz.de/10009663233
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Assessing the cost of accounting-based long-short trades : should you invest a billion dollars in an academic strategy?
Beaver, William H.; McNichols, Maureen; Price, Richard A. - 2014
We highlight key assumptions implicit in the models used by academics conducting research on market efficiency. Most notably, many academics assume that investors can borrow unlimited amounts and construct long-short portfolios at zero cost. We relax these assumptions and examine the...
Persistent link: https://www.econbiz.de/10010259679
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Benchmarks in search markets?
Duffie, Darrell; Dworczak, Piotr; Zhu, Haoxiang - 2015
We characterize the price-transparency role of benchmarks in over-the-counter markets. A benchmark can, under conditions, raise social surplus by increasing the volume of beneficial trade, facilitating more efficient matching between dealers and customers, and reducing search costs. Although the...
Persistent link: https://www.econbiz.de/10011524569
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The costs and benefits of short sale disclosure
Duong, Truong X.; Huszár, Zsuzsa R.; Yamada, Takeshi - In: Journal of Banking & Finance 53 (2015) C, pp. 124-139
In this study, we examine the impact of a market-wide mandatory disclosure policy on short selling on the Tokyo Stock Exchange. We find that average short selling slightly declined while investors’ shorting strategies changed significantly in response to the disclosure. Previously highly...
Persistent link: https://www.econbiz.de/10011209848
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(How) has the market become more efficient?
Bertone, Stephen; Paeglis, Imants; Ravi, Rahul - In: Journal of Banking & Finance 54 (2015) C, pp. 72-86
deviations is related to volatility, liquidity, and transaction costs of both the index constituents and the ETF. Further, the … influence of news arrival, and liquidity (volatility) shocks on the deviations persists for several hours. Finally, we document …
Persistent link: https://www.econbiz.de/10011264661