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Is Liquidity Largely Unpriced While Market Volatility is Systematically Priced?
Levy, Andre - 2016
share volatility risk that illiquidity and virtually all impediments to trade cannot be priced. This is because the buying …-Bills and equity securities, to show that market volatility is systematically priced. Moreover, only in the presence of binding …
Persistent link: https://www.econbiz.de/10013001416
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Stochastic Liquidity as a Proxy for Nonlinear Price Impact
Muhle-Karbe, Johannes; Wang, Zexin; Webster, Kevin T. - 2022
Optimal execution and trading algorithms rely on price impact models, like the propagator model, to quantify trading costs. Empirically, price impact is concave in trade sizes, leading to nonlinear models for which optimization problems are intractable and even qualitative properties such as...
Persistent link: https://www.econbiz.de/10014237952
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Does smooth ambiguity matter for asset pricing?
Gallant, A. Ronald; Jahan-Parvar, Mohammad R.; Liu, Hening - 2018
-varying volatility are preferred to the long-run risk model. We analyze asset pricing implications of the estimated models …
Persistent link: https://www.econbiz.de/10011780610
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The Decomposition of Jump Risks in Individual Stock Returns
Xiao, Xiao - 2018
: the systematic and idiosyncratic jumps and the systematic and idiosyncratic diffusive volatility. By considering a general …
Persistent link: https://www.econbiz.de/10012934761
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Information Arrival as Price Jumps
Polimenis, Vassilis - 2011
We propose two new risk measures (i-beta and i-gamma) for a stock, which aim to distinguish between noise and information. Noise allows the stock price evolution to happen along a continuous path. Market wide economic information is transmitted via price jumps. Noise is idiosyncratic and does...
Persistent link: https://www.econbiz.de/10013124058
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The Cost of Misspecifying Price Impact
Hey, Natascha; Bouchaud, Jean-Philippe; Mastromatteo, Iacopo - 2023
Portfolio managers’ orders trade off return and trading cost predictions. Return predictions rely on alpha models, whereas price impact models quantify trading costs. This paper studies what happens when trades are based on an incorrect price impact model, so that the portfolio either over- or...
Persistent link: https://www.econbiz.de/10014350307
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More Informative Disclosures, Less Informative Prices? Portfolio and Price Formation Around Quarter-Ends
Gormley, Todd A. - 2020
Fund trades and prices vary systematically with the quarterly reporting cycle. Funds are more likely to complete the building of a position at quarter-end, which is when most funds report positions to investors, and begin building new positions afterwards. While some of the observed shift in...
Persistent link: https://www.econbiz.de/10012853490
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Can the variance after-effect distort stock returns?
Berrada, Tony - 2021
predictive variance. We show theoretically how this adjustment factor affects both average and volatility of excess returns. We … related to excess volatility as predicted by the model. Further confirming the model's implications, we also show how stock …
Persistent link: https://www.econbiz.de/10012487731
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Information and inventories in high-frequency trading
Muhle-Karbe, Johannes; Webster, Kevin - 2015
We study how short-term informational advantages can be monetized in a high-frequency setting, when large inventories are explicitly penalized. We find that if most of the additional information is revealed regardless of the high-frequency traders' actions, then fast inventory management allows...
Persistent link: https://www.econbiz.de/10011412266
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Investor sentiment and stock return volatility : evidence from the Johannesburg Stock Exchange
Rupande, Lorraine; Muguto, Hilary Tinotenda; … - In: Cogent economics & finance 7 (2019) 1, pp. 1-16
Volatility is an important component of asset pricing; an increase in volatility on markets can trigger changes in the … risk distribution of financial assets. In conventional financial theory, investors are considered to be rational and any … hypothesized that there are movements in risk that are driven by volatility linked to sentiment-driven noise trader activity whose …
Persistent link: https://www.econbiz.de/10012023919