Trading Motives Research Articles

THE TYPOLOG Y AND MOTIVATION OF OWNER COMMUNITY OF NURI TALAUD AS PROTECTED BIRD IN KARAKELANG ISLAND

Nuri talaud is a member of parrot and status listed as rare, endangered, endemic and protected bird species. Interesting feather color, sound and scarcity are the main attraction making nuri talaud as a pet. The aim of this study was to determine the typology and motivation of Karakelang community towards ownership nuri talaud and to observe people's knowledge on conservation of the species. The research was conducted in the Bantane, Bengel and North Beo Villages. Retrieval of data was held in November-December 2014 with a survey method by including interviews and observation. Data were analyzed by using Chi Square test (χ2) and descriptive qualitative method. The results showed that, firstly, 92.6% were in the age 15-59 years, 77.7% respondents were graduated form elementary and junior high school, 63.0% of them are farmers, 74.1% were dominated by male, 81.5% were local people of Karakelang Island and 70.3% lived in rural areas. Secondly, rural communities were generally keep nuri talaud with an economic motivation for trading , whereas urban communities maintain it for hobbyst as pets. Thirdly, status of nuri talaud as endangered birds were generally known by the communities, however illegal trade of this species was still continue due to lack of enforcement.

The Liquidity Risk Premium Demanded by Large Investors: Dynamic Portfolio Choice with Stochastic Illiquidity

textabstractRecent empirical work documents large liquidity risk premiums in stock markets. We calculate the liquidity risk premiums demanded by large investors by solving a dynamic portfolio choice problem with stochastic price impact of trading, CRRA utility and a time-varying investment opportunity set. We find that, even with high trading-cost rates and substantial trading motives, the theoretically demanded liquidity risk premium is negligible, less than 3 basis points per year. Assuming forced selling during market downturn enlarges the liquidity risk premium to maximally 20 basis points per year, which is well below existing empirical estimates of the liquidity risk premium.

On Valuation and Liquidity Motivated Mutual Fund Trading

We propose a novel Trade Motivation Matrix (TMM) that allows differentiating mutual funds’ valuation-motivated (VM) and liquidity-motivated (LM) trades on single trade level. It thus enables analyses of stock picking skill on three levels: trade, stock and fund. On trade level, we find significant outperformance of VM buys and significant underperformance of VM sells indicating manager stock picking skills, especially during illiquid market periods. Benchmarking trades against different stock universes, we are the first to reveal that selling-skill has a stronger impact on fund performance than buying-skill. Further, VM trades outperform LM trades confirming negative performance effects due to flow risk, especially when market liquidity is low. On stock level, VM trades capture size, value, liquidity and market risk premiums. LM trades are related to stock momentum. VM trading in specific stocks explains future stock returns. On fund level, higher VM trading and in particular VM selling is related to higher future fund alpha, especially during illiquid times.

Identifying Trading Motives in a Quadratic-Normal Model

A quadratic-normal model has been a workhorse model in finance. While it can be derived from a CARA preference, some recent papers use risk-neutral traders facing an inventory cost to generate a quadratic-normal structure. So far, a relationship between the two models has been unclear. Using a simple framework nesting both models, I highlight a key economic difference between the two models, and demonstrate that they can produce distinct predictions with respect to price informativeness, volatility, volume, and price impact in response to a change in public information. Implications of the results for an identification of trading motives are discussed.

The Information Content of Intraday Implied Volatility for Volatility Forecasting

AbstractThis study examines the intraday S&P 500 implied volatility index (VIX) to determine when the index contains the most information for volatility forecasting. The findings indicate that, in general, VIX levels around noon are most informative for predicting realized volatility. We posit that the VIX performs better during this time period because trading motivation around noon is less complex, and therefore trades contain more information on the market expectation of future volatility. Further investigation on the 2008 financial crisis period suggests that market participants become more cautious, and thus the forecasting performance is sustained until the market's close. Copyright © 2015 John Wiley & Sons, Ltd.

THE EVOLUTION OF A NORTHERN CORN MARKET: DONCASTER, 1843–1873

The English market was a physical space where production and consumption converged and the relationship between town and country was mediated. As Colin Stephen Smith argued, ‘Markets and marketing lie at the heart of English economic and social history’.1 Corn halls were economic powerhouses of the Victorian era, and as such were a physical embodiment of the corn trade. Despite the integral role of the corn market and corn halls at the heart of trade in arable areas during the nineteenth century, they remain underrepresented entities in accounts of nineteenthcentury agriculture. Yet corn halls are important portals to the history of agricultural trade and the relationship between town and country. This article examines how and why the corn market in Doncaster evolved in the mid nineteenth century. It explores responses to the growth of the corn trade, commercial and civic motivations, and perceptions of town and country. It contributes a northern perspective to the understanding of corn halls in the nineteenth century.

Information-Based Trading and Autocorrelation in Individual Stock Returns

Applying a recently developed approach, the paper estimates the daily arrival rates of buy and sell orders originated from different trading motives for each stock in a sample of NYSE-listed companies. Based on these arrival rates, it shows that stock return tends to continue on consecutive days when privately-informed trading prevails, leading to positive return autocorrelation. But return is more likely to reverse itself on days with continuous trading on dispersion in beliefs, leading return autocorrelation to be more negative. Contrarian trading strategies conditional on daily measures of investment disagreement can yield economically and statistically significant excess returns.

Individual Investors' Trading Motives and Security Selling Behavior

Using a unique dataset of individual investors, we categorize their security sale transactions into liquidity sales (proceeds withdrawn from the sample bank), speculative sales (proceeds used to purchase other securities), and all other sales. Liquidity sales and speculative sales make up 12% and 20% of all transactions, respectively. The key question of this paper is does trade motivation affect trading behavior? The answer is yes. Heuristic criterions like the disposition effect and attention play a greater role when selling for liquidity reasons than for speculative sales. For mutual funds, this bears negatively on portfolio performance.

Excessive Dynamic Trading: Propagation of Belief Shocks in Small Markets

Can belief shocks make trading excessive? We present a dynamic inventory management model in which belief shocks gradually propagate across traders, leading to the inflated trading activity which reduces traders' welfare. Trading can be socially beneficial because smoothing heterogeneous asset positions saves inventory costs. Without belief shocks, traders focus on the socially beneficial trading and the dispersion of the asset positions decreases monotonically. We show that one-shot belief shocks induce a speculative trading, which aggregates information but slows down the convergence of the asset positions. When traders' beliefs change quickly, the dispersion of the asset positions goes up, creating a cyclical pattern in volume. We also show that the high frequency trading amplifies the impact of belief shocks by making the speculation less costly, and therefore steering traders away from the socially beneficial trading motive.

Speculation and Hedging in Segmented Markets

We analyze a model in which traders have different trading opportunities and learn information from prices. The difference in trading opportunities implies that different traders may have different trading motives when trading in the same market�some trade for speculation and others for hedging�and thus they may respond to the same information in opposite directions. This implies that adding more informed traders may reduce price informativeness and therefore provides a source for learning complementarities leading to multiple equilibria and price jumps. Our model is relevant to various realistic settings and helps to understand a variety of modern financial markets.

Asset Exchange with Search Frictions and Costly Information Acquisition

This paper characterizes conditions under which centralized and decentralized markets (CM/DM) co-exist for asset trading. The asset payoff and trading motive are seller's private information. CM is immune to search frictions, but suffers from adverse selection. DM with bilateral trading may emerge since buyers acquire costly information on asset payoff, and offer a trading menu different from that by uninformed buyers. As matching efficiency in DM increases and the information cost decreases, more trade migrates from CM with adverse selection to DM with search frictions. We use the model to address the heterogeneous welfare effect of a government asset purchase program.

Why do directors trade? Evidence from US multi‐company directors

PurposePrevious literature suggests various motives and factors affecting insider trading, but little systematic empirical evidence exists on how they affect insider trading decisions jointly. The purpose of this paper is to address this issue.Design/methodology/approachThis study adopts a multivariate fix‐effect framework to jointly examine the factors affecting insider trading decisions using a sample of directors serving multiple companies. The timing of the trading is taken as given and an examination made as to why a specific stock was traded among all the insider stocks the director holds. The observations of the untraded stocks supplement the direct observation of the traded stocks, and allow the issue of insider trading motives to be tested in a multivariate framework with director fix‐effect.FindingsEvidence is found for the joint presence of the following motives in determining directors' trading choices: information; insider preferences for small value companies with significant previous price movement; the avoidance of information sensitive period; and corporate‐level insider trading restrictions. It is empirically shown that director trading motives vary by transaction size.Originality/valueThis paper provides systematic empirical evidence on the factors affecting the trading decisions of US directors.

Are Investors Irrational? - Study on China Warrant Market

This paper studies Chinese warrant price deviation. By observing “asymmetric price error” phenomena, we propose that the rational hedging and speculation motivation is one important cause for warrant price deviations. Investors do not speculate irrationally under the resale motivation all the time, neither do they ignore warrants’ hedging function. Instead, investors would trade for hedging and speculation purpose and drive the warrant prices when the underlying assets are significantly undervalued or overvalued. The paper applies a model-free measure for warrant price deviation and verifies the proposal by studying five couples of warrants from 2006 to the beginning of 2008. It has been found that the rational hedging and speculation motivation dominates other trading motivation in the market.

Are Short-Sellers Different?

While theoretical models strongly suggest that short-sales are mainly driven by private information, recent empirical evidence of has been rather mixed. This paper contributes to the discussion by looking at various potential motives to sell short and compares these with regular buys and sales with regards to variation in the information contents and timing of short-sales. We find that short-sellers have different private information than regular buyers and sellers, which seems to have a longer life-time, being related to previous buying pressure. The information advantage of short-sellers seems originating from skilled analysis of publicly available data rather than corporate insider information. Short-sales provide an important stabilizing role by providing liquidity in periods of uninformed buying pressure. Overall, we find that short-sales are driven by multiple trade motives, which sets short-sellers apart from regular buyers and sellers.

The Information Content of Option Demand

This paper combines the concept of market sidedness with excess option demand (changes in open interest) to solve the empirical challenge of separating directional from uninformed trading motives in widely available, unsigned options data. Our measure of options market sidedness persistently predicts the sign and strength of stock returns.Trading strategies conditional on the measure are highly profitable. For instance, when the measure indicates positive(negative) information, out-of-the-money calls (puts) generate returns of 27% (32%) over roughly four weeks. Risk-adjusted returns of a long-short equity strategy yield more than 2%. An increase in directionally informed demand predicts a decrease in option liquidity and increases in pricing inefficiency.

Review of the Economic Characteristics of the Arabic Magharib Nations

The study presents review of the Magharib countries economic bloc which consists of Algeria, Libya, Morocco, Tunisia and Mauritania. The feasibility of that economic bloc concludes its potentials. There comparative advantages for each county to integrate with the others in production factors and products, surplus labor in Mauritania and shortages in Libya, surplus agricultural production in Morocco and Tunisia, Morocco and shortages in Mauritania and Libya, energy surplus in Libya and shortages in Mauritania, Tunisia and surplus in Libya. However, the review of the institutional structure of its dynamics reveals that it is politically controlled and it is more or less motivated by individual country impulses. De facto application of trade enhancements and motivation do not exist. Economic boundaries, e.g., trade taxation and tariffs reduce possible exchange without economic sense. I hereby conclude that the main hindrance of potentiating trade and transference, e.g., cross border, tariffs and production factors. Different political regimes seem to be the primary hindrance which reduces chances of economic development. I propose here that such condition cannot support the modus operandi of that economic bloc and that joining the French African Economic Bloc will do better in integrating economies of those West African countries.

Review of the Arabic Magharib Economic Bloc

The study presents review of the Magharib countries economic bloc which consists of Algeria, Libya, Morocco, Tunisia and Mauritania. The feasibility of that economic bloc concludes its potentials. There comparative advantages for each county to integrate with the others in production factors and products, surplus labor in Mauritania and shortages in Libya, surplus agricultural production in Morocco and Tunisia, Morocco and shortages in Mauritania and Libya, energy surplus in Libya and shortages in Mauritania, Tunisia and surplus in Libya. However, the review of the institutional structure of its dynamics reveals that it is politically controlled and it is more or less motivated by individual country impulses. De facto application of trade enhancements and motivation do not exist. Economic boundaries, e.g., trade taxation and tariffs reduce possible exchange without economic sense. I hereby conclude that the main hindrance of potentiating trade and transference, e.g., cross border, tariffs and production factors. Different political regimes seem to be the primary hindrance which reduces chances of economic development. I propose here that such condition cannot support the modus operandi of that economic bloc and that joining the French African Economic Bloc will do better in integrating economies of those West African countries.

A Hidden Markov Process Approach to Information-Based Trading

This paper proposes a novel approach to information-based trading, incorporating both asymmetric information and symmetric order-flow shocks. It focuses on the dynamics of securities trading and postulates that trading activities are determined by the state of nature. A two-dimensional Markov chain is used to model the hidden information states of the market and the state set is allowed to vary across time and companies. Distinguished from the prevailing approaches to information-based trading, the Hidden Markov Model (HMM) approach updates the prior belief of information states using newly observed order flows and identifies trading motives in a data-driven manner. Each trading day is associated with dynamic measures of probability of information based trading (PIN) and probability of symmetric order-flow shock (PSOS). In addition, it allows multiple occurrences of information events rather than limit the frequency of information arrival to once a day. The HMM approach does not rely on a particular market structure and it can be applied to various markets. To evaluate the HMM approach, we conduct extensive Monte Carlo simulation experiments. It shows superior performance in dynamic daily PIN and PSOS estimates as well as cumulative estimates over any time interval in all simulation scenarios, evidenced by their negligible errors compared with true values and higher accuracy than the estimates obtained from alternative approaches. Using a sample of 30 NYSE stocks, we examine the properties of the dynamic PIN estimate as a proxy for information asymmetry and the dynamic PSOS estimate as a measure of illiquidity. We also show how they can be used to explain and predict realized volatility of returns. Dynamic PSOS is a significant contributor to the realized volatility for all the stocks in the sample and its effect is more profound than dynamic PIN, reflecting dominant effect of investors' dispersed beliefs on price fluctuations.

Bayesian analysis of multi-group nonlinear structural equation models with application to behavioral finance

Structural equation models (SEMs) have been widely used to determine the relationships among certain observed and latent variables in behavioral finance. The purpose of this paper is to develop a Bayesian approach for analysing multi-group nonlinear SEMs. Using recently developed tools in statistical computing, such as the Gibbs sampler, we propose an efficient method to estimate parameters and select an appropriate model. The proposed method is used to investigate the relationships among all identified influential factors that have an impact on the motivation for insider trading within the framework of behavioral finance.

The Information Content of Option Demand

This paper combines the concept of market sidedness with excess option demand (changes in open interest) to solve the empirical challenge of separating directional from uninformed trading motives in widely available, unsigned options data. Our measure of options market sidedness persistently predicts the sign and strength of stock returns. Trading strategies conditional on the measure are highly profitable. For instance, when the measure indicates positive (negative) information, out-of-the-money calls (puts) generate returns of 27% (32%) over roughly four weeks. Risk-adjusted returns of a long-short equity strategy yield more than 2%. An increase in directionally informed demand predicts a decrease in option liquidity and increases in pricing inefficiency.