Start Of Trading Research Articles

Stochastic Conditional Duration Model with Intraday Seasonality and Limit Order Book Information

It is a widely known fact that the intraday seasonality of trading intervals for financial transactions such as stocks is short at the beginning of business hours and long in the middle of the day. In this paper, we extend the stochastic conditional duration (SCD) model to capture the pattern of intraday trading intervals and propose a new Markov chain Monte Carlo method to estimate this intraday seasonality simultaneously. To efficiently generate the Monte Carlo sample, we used a hybrid of the Gibbs/Metropolis–Hastings (MH) sampling scheme and also applied generalized Gibbs sampling. In addition to capturing this intraday seasonality, this paper also considers limit order book information. Three-day tick data for three stocks obtained from Nikkei NEEDS are used for estimation, and model selection is performed on smooth parameters, Weibull distribution and Gamma distribution. The typical intraday regularity of frequent trading immediately after the start of trading is confirmed, and the spread of the limit order book information is also found to affect the trading time interval.

Medallion Fund: The Ultimate Counterexample?

The performance of Renaissance Technologies’ Medallion fund provides the ultimate counterexample to the hypothesis of market efficiency. Over the period from the start of trading in 1988 to 2018, $100 invested in Medallion would have grown to $398.7 million, representing a compound return of 63.3%. Returns of this magnitude over such an extended period far outstrip anything reported in the academic literature. Furthermore, during the entire 31-year period, Medallion never had a negative return despite the dot.com crash and the financial crisis. Despite this remarkable performance, the fund’s market beta and factor loadings were all negative, so Medallion’s performance cannot be interpreted as a premium for risk bearing. To date, there is no adequate rational market explanation for this performance. TOPICS:Portfolio management/multi-asset allocation, performance measurement Key Findings • The performance of Medallion fund was unprecedented over the 31 years from January 1998 to December 2018. • The performance results cannot be rationalized as a risk premium. • Medallion represents the ultimate challenge to the efficient market hypothesis.

Medallion Fund: The Ultimate Counterexample?

The performance of Renaissance Technologies’ Medallion fund provides the ultimate counterexample to the hypothesis of market efficiency. Over the period from the start of trading in 1988 to 2018, $100 invested in Medallion would have grown to $398.7 million, representing a compound return of 63.3%. Returns of this magnitude over such an extended period far outstrip anything reported in the academic literature. Furthermore, during the entire 31-year period, Medallion never had a negative return despite the dot.com crash and the financial crisis. Despite this remarkable performance, the fund’s market beta and factor loadings were all negative, so that Medallion’s performance cannot be interpreted as a premium for risk bearing. To date, there is no adequate rational market explanation for this performance.

START OF TRADE AND ECONOMIC KYRGYZSTAN-GERMANY COOPERATION

START OF TRADE AND ECONOMIC KYRGYZSTAN-GERMANY COOPERATION

How did you get up and running? Taking a Bourdieuan perspective towards a framework for negotiating strategic fit

This article suggests a theoretical framework for illustrating significant iterative processes that need to be strategically managed when entering a new field or changing a social position within a field. Applying a process-relational perspective, the framework theoretically underpins what propels individuals to change their behaviour conceptualized as constructing a strategic fit between personal structure and fields. Using Bourdieu’s concepts of habitus, field and capitals as a lens the analysis reveals how capital transformations eventually can lead to a social construction of this temporary strategic fit. The article argues that the performance of habitus expresses temporary field specific social positioning as a social materialization of macrostructures (gender, age, class, etc.). This suggested framework is applied to conceptualizing how nascent entrepreneurs successfully negotiate entrepreneurial processes. It is concerned with a small aspect: how to physically start a business (its registration and the start of trading). In this context, the article unpacks how the transformation of capitals mediates nascent entrepreneurs’ social positioning. This article contributes to the growing ‘social turn’ research situating entrepreneurial processes within social relations and context and the emerging Entrepreneurship as Practice field. It offers practical implications for business support and research directions.

Liquidity and market efficiency in the world's largest carbon market

We investigate liquidity and market efficiency on the world's largest carbon exchange, IntercontinentalExchange Inc.’s European Climate Exchange (ECX), by using intraday short-horizon return predictability as an inverse indicator of market efficiency. We find a strong relationship between liquidity and market efficiency such that when spreads narrow, return predictability diminishes. This is more pronounced for the highest trading carbon futures and during periods of low liquidity. Since the start of trading in Phase II of the EU Emissions Trading Scheme (EU-ETS) prices have continuously moved nearer to unity with efficient, random walk benchmarks, and this improves from year to year. Overall, our findings suggest that trading quality in the EU-ETS has improved markedly and matures over the 2008–2011 compliance years.

Liquidity and Market Efficiency: Analysis of the World’s Largest Carbon Futures Exchange

We examine the world’s largest carbon exchange, ICE’s ECX, by applying Chordia et al.’s (2008) conception of short-horizon return predictability as an inverse indicator of market efficiency. We find a strong relationship between liquidity and market efficiency such that when spreads narrow, return predictability diminishes. This is more pronounced for the highest trading carbon futures and during periods of low liquidity. Since the start of trading in Phase II of the EU Emissions Trading Scheme (EU-ETS) prices have continuously moved nearer to unity with, efficient, random walk benchmarks, and this improves from year to year. Overall, our findings suggest trading quality in the EU-ETS has improved markedly and matures over the 2008-2011 compliance years.

Political Economy of Trade Openness and Government Size

This paper proposes a theoretical model that may provide useful insights into the relationship between trade openness and the size of government, as well as a possible explanation for the results of empirical tests of such a relationship. We develop a Hecksher–Ohlin model with publicly provided goods, where the level of publicly provided goods is determined in a probabilistic voting framework. In this context, we show that the start of trade may increase or decrease government size depending on the capital‐labor ratio in each country.

Business and Ethics After September 11

On September 17, 2001, Richard Grasso, Chairman and Chief Exec utive of the New York Stock Ex change (NYSE), presided over the resumption of equity trading only four working days after the Septem ber 11 terrorist attach had halted trading indefinitely and created a national sense of physical and eco nomic vulnerability. Sentiment on the trading floor and in nearby offices, where many floors, des fa, and corners were still layered with dust as if trading had ceased thou sands of years before, supported defiance of terrorism with a mani festation of economic resolve. Suggesting that Grasso 's de termination as the leader of the free market was morally valiant, one trader expressed the common feeling that, If the marketplace were to fold or blunder, we would be giving the terrorists who did this their third target. To a reporter who noted the presence of grief counselors on the trading floor, Grasso said of himself My coun seling is this: that Monday morning 9:30 bell. l The start of trading was a return to instinct, 2 as an other trader put it, and once a ma rine sang GodBless America and the bell was rung by uniformed public servants observed by gov ernment leaders presiding with Mr. Grasso, the whole scene intimat ed that getting on with business

How Good Are the UK VAT Registration Data at Measuring Firm Births

This paper utilises some data from a survey of recent VAT registrations in the North of England to examine two issues: first, the extent to which registrants are involved in setting up entirely new businesses; and secondly, the relationship between the date of registration and the start of trading. The paper suggests that some caution should be exercised in the use of VAT registration statistics in the analysis of firm births.

The Effect of Public Information and Competition on Trading Volume and Price Volatility

In a one-period model of market making with many exogenously informed traders, we first show that the variance of prices and expected.trading volume depend on the public information released at the start of trading. This is accomplished by representing beliefs with elliptically countoured distributions, for which the form of optimal decision rules does not depend on the specific distribution used. Second, if the model is altered so that the decision to become informed is made endogenous, then the decision rules of the market-maker and infomed traders depend on the public information. Third, in a multiperiod model with many informed traders and long-lived private information, recursion formulas similar to those of Kyle (1985) hold for all elliptically contoured distributions, trading volume is autocorrelated, and, unless per period liquidity trading is bounded.away from zero as new trading periods are added, informed traders' profits vanish. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

S&P 500 Cash Stock Price Volatilities

ABSTRACTS&P 500 stock return volatilities are compared to the volatilities of a matched set of stocks, after controlling for cross‐sectional differences in firm attributes known to affect volatility. No significant difference in volatility is observed between 1975 and 1983—before the start of trade in index futures and index options. Since then, S&P 500 stocks have been relatively more volatile. The difference is statistically, but not economically, significant. The relative increase occurs primarily in daily returns and only to a lesser extent in longer interval returns. Other factors besides the start of derivative trade could be responsible for the small increase in volatility.

The timing of rights issues on the Johannesburg Stock Exchange

Although a great deal of trading in rights transactions takes place on the various stock exchanges of the world there is a dearth of empirical evidence which might determine an observable trading strategy related to such transactions. The traditional view is that subscription rights to additional issues of securities will reach their maximum price shortly after the start of trading and then decrease until the end of the subscription period. The results of this investigation into rights issues of companies listed on the JSE clearly rejects the 'sell the rights early' trading strategy. It is observed that there is a considerable number of rights which reach their peak price in the middle and in the final trading period. Empirical evidence presented in this paper reveals three factors that could be used to predict the market price of rights listed on the JSE. All three factors are highly correlated with the market price of rights. Therefore, an evaluation of an observable trend in these factors could be used to advantage by investors engaged in rights transactions.