Trade Size Research Articles

Who knows more and makes more? A perspective of order submission decisions across investor types

This research examines the impacts of order submission decision across investor types on overall stock returns and trading performances by using a unique dataset and new measures that present several new findings. In terms of order aggressiveness and trade size, different types of investors display distinct order submission behaviors· Professional investors outperform other investors in the near term following their current-day trading, while aggressive and large sells derive better trading performance for all institutional investors. Only foreign investors and other institutions have better performance from more aggressive buys· Finally, individual traders contribute to total trades more than institutions do, but they tend to use the least aggressive price and smallest trade size per order. Compared to professional investors, individuals perform poorly.

Credit frictions and participation in over-the-counter markets

This paper formalizes a Nash bargaining game between two players constrained by capacity decisions made prior to entering the negotiation. In equilibrium, strategic interactions drive capacity choices to zero and shut trade down despite the existence of gains from trade. The game is embedded in a general equilibrium model of decentralized asset trade with credit frictions to investigate the interaction between availability of credit and investors' participation, modeled through their choices of inventory and payment capacity. Partial access to credit is sufficient to restore trade. The strategic interactions between payment capacity and inventory generate endogenous heterogeneity in holdings, trade sizes and prices, and complementarity between money and credit.

The asymmetric effect of trade openness on economic growth in South Africa: a nonlinear ARDL approach

The untested hypothesis of a linear association between trade openness and economic growth in earlier studies may bring about incorrect inferences if indeed the association is nonlinear. This study uses the newly developed nonlinear autoregressive distributed lags (NARDL) framework to re-examine the link between trade openness and economic growth in South Africa over the period 1960–2016, highlighting the asymmetric effects of trade openness using an innovative proxy of trade openness proposed by Squalli and Wilson (World Econ 34(10):1745–1770, 2011). In contrast to previous studies, the new proxy is constructed to take into consideration both South Africa’s trade share of its GDP and its relative size of trade in relation to world trade in a specified period. Adopting this novel approach to capture openness permits the simultaneous testing of short- and long-run nonlinearities through positive and negative partial sum decompositions of trade openness. It also enables us to quantify the short- and long-run impacts of trade openness increases and decreases on economic growth from asymmetric dynamic multipliers. The results show that trade openness has short- and long-run asymmetric effects on economic growth. These results have important policy implications.

Hidden Liquidity, Market Quality, and Order Submission Strategies

Using a recent pilot program as an exogenous shock to hidden liquidity, we show that hidden liquidity has significant effects on various measures of market quality and order submission strategies after controlling for market volatility and other stock attributes. Spreads, depths, trading volume, and trade size increase with hidden liquidity. The extent of informed trading and the price impact of a trade also increase with hidden liquidity. Traders use more inside-the-quote limit orders, and algorithmic traders engage in more pinging activities and raise message traffic when there is more hidden liquidity.

Intraday momentum in Chinese commodity futures markets

In this paper, we study whether the intraday momentum exists in Chinese commodity futures markets. We first construct an open-interest-weighted index with the high-frequency data of all commodity futures traded and then examine the predictability of the last half-hour return with both in-sample and out-of-sample tests. Consistent with findings in other markets, we show that the first half-hour return can readily predict the last half-hour return. We further demonstrate that the magnitude of this intraday momentum varies with volatility, trading volume, trade size, the sign of the first half-hour return, the type of commodity futures, and the launch of night trading. Additionally, this intraday momentum does not result from data snooping but has economic significance and remains robust under different index weighting and predictor calculation methods.

Municipal Bond Trading and Political Scandals

We study municipal bond trading activity before, during, and after announcements of government officials’ misconduct. Using a sample of over 39,000,000 bond trades from January 2006 to December 2013 in nearly 500,000 bonds, we find that spreads are higher on initial news announcement, indictment announcement, and trial verdict announcement days than other trading days. Spreads remain elevated for 5 trading days following these announcements. We also find that large bond trades account for the majority of price discovery on announcement days. Overall, our results establish a link between government officials’ misconduct and municipal bond markets. TOPIC:Financial crises and financial market history Key Findings • This article examines how municipal bond traders react to news regarding potential wrongdoing by government officials. • We examine news announcements regarding the misconduct of state officials and the effect that might have on municipal bond trading. We find that when there is a news announcement related to the misconduct or wrongdoing of a government official, the average municipal bond trade size increases. • We find that municipal bond spreads increase on news related to potential miscount of state officials. • We find that price discovery in municipal bonds occurs more in larger-size trades when news related to potential miscount of state officials is revealed.

Federalism, partial prohibition, and cross-border sales: Evidence from recreational marijuana

Marijuana is partially prohibited: though banned federally, it is available to 1 in 4 U.S. adults under state statutes. We measure the size of the interstate trade generated by state-level differences in legal status with a natural experiment: Oregon allowed stores to sell marijuana for recreational use on October 1, 2015, next to Washington where stores had been selling recreational marijuana since July 2014. Using administrative data covering the universe of Washington's sales and a differences-in-discontinuities approach, we find retailers along the Oregon border experienced a 36% decline in sales immediately after Oregon's market opened. We investigate the home location of recent online reviewers of marijuana retailers and find similar cross-border patterns. By the end of Washington's 2018 fiscal year, our results imply that Washington had earned between $44 million and $75 million in tax revenue from cross-border shoppers. These cross-border incentives may create a “race to legalize.”

An intelligent financial portfolio trading strategy using deep Q-learning

Portfolio traders strive to identify dynamic portfolio allocation schemes that can allocate their total budgets efficiently through the investment horizon. This study proposes a novel portfolio trading strategy in which an intelligent agent is trained to identify an optimal trading action using deep Q-learning. We formulate a Markov decision process model for the portfolio trading process that adopts a discrete combinatorial action space and determines the trading direction at a prespecified trading size for each asset, thus ensuring practical applicability. Our novel portfolio trading strategy takes advantage of three features to outperform other strategies in real-world trading. First, a mapping function is devised to handle and transform any action that is initially proposed but found to be infeasible into a similar and valuable feasible action. Second, by overcoming the dimensionality problem, this study establishes agent and Q-network models to derive a multi-asset trading strategy in the predefined action space. Last, this study introduces a technique that can derive a well-fitted multi-asset trading strategy by designing an agent to simulate all feasible actions in each state. To validate our approach, we conduct backtesting for two representative portfolios and demonstrate superior results over the benchmark strategies.

Question: Do Bitcoin/Yen Traders Ever Take a Day Off? Answer: Not Often

The aim is to analyse daily Bitcoin trading activity in the Bitcoin/Yen market, looking not at Bitcoin’s price or aggregate volume, but at the size and number of trades, in order to understand any changes in daily trading behaviour during different market conditions. Trade data from 2017-2019 for five Bitcoin Exchanges (Kraken, BTCBOX, Fisco, Zaif and Coincheck) is used in the analysis and split into four sub-periods based on Bitcoin’s market conditions. The results are surprising. There are no consistent patterns to trading activity. Both small and large investors continue to trade equally across all weekdays, weekends and holidays. The only factor driving changes in trading activity is the Bitcoin price itself.

Empirical Analysis on Foreign Economic Trade of Smart City under the Background of Free Trade Agreement

Taking the construction of smart city in Yantai as an opportunity, this paper analyzes the current situation of foreign trade under the background of free trade agreement, explores the main factors affecting the level of trade, and puts forward feasible Suggestions for the development of foreign trade in Yantai based on the construction of smart city. Through the analysis of the trade flow between Yantai and 13 major trading countries(regions), the time-varying attenuation stochastic frontier gravity model is constructed to explore the main factors affecting Yantai’s foreign trade, and the total trade efficiency of Yantai is analyzed. The research shows that the total trade efficiency presents an overall increasing trend, and the trade and population size of Yantai have a significant impact on the trade flow. In the process of building a smart city, the planning and integration of Yantai’s foreign trade should be carried out from various aspects to further improve the trade efficiency.

An Analysis on the Improvement of China's Product Export Competitiveness to the United States based on Production Division

본 연구는 2008년 금융위기 이후 중국과 미국의 무역마찰 증대와 무역촉진 현황을 양국의 무역 관계, 규모, 구조에 대한 생산 분업의 영향을 고려하여 중국 상품의 미국 수출경쟁력을 표준국제무역분류기준(SITC)에 따른 가치사슬 관점과 개선된 지수를 바탕으로 재검증하고자 하였다. Section 8에서는 중국이 미국에 비해 수출가치, 수출강도, 수출단가, 무역 보완성 측면에서 현저한 이점을 지니고 있어서 대미 수출경쟁력을 보이는 것으로 확인되었다. 대미 무역적자로 분석된 Section 5와 대미 무역흑자로 파악된 Section 6 모두 중국의 대미 수출 단가가 상대적으로 높게 나타났다. Section 7에서는 미국에 대한 수출 단가는 높지만 수출 강도가 다소 낮아 중국이 기술집약적 제품에서 미국에 대한 수출경쟁력이 상대적으로 약한 것으로 확인되었다. 중국의 대미 경쟁력을 추가적으로 검증하기 위해 일본, 인도, 러시아, 말레이시아, 태국을 비교대상으로 선정하여 분석한 결과 중국은 비교 대상 국가들에 대한 수출경쟁력이 유의미하지 않은 것으로 나타났으며, 특히 일본에 대한 자본 및 기술집약산업에서 수출경쟁력이 유의미하지 않은 것으로 나타났다. 이를 바탕으로 중국 경제규모, 1인당 소득, 기술연구개발 및 제도의 4가지 격차, 상호직접투자 요인을 설명변수로 설정하여 중력모형을 이용한 패널 실증분석을 수행하였다. 분석결과, 중국 경제의 점진적 성장은 수출경쟁력을 효과적으로 향상시키지 못했던 것으로 나타났으며, 과거 다른 나라의 직접투자를 흡수함으로써 중국이 기술적 어려움과 대외무역의 지속적인 마찰이 초래하게 되었던 것으로 파악되었다. 대외직접투자와 자체적인 제도의 개선은 긍정적인 역할을 하였지만, 대외투자 규모, 주최국 수요 능력, 제도 보완에 국한되어 있어서 장기적으로 중국 상품의 수출경쟁력을 단기간에 개선하기는 어려운 것으로 파악되었다. 마지막으로, 중국이 국내외의 관점에서 지속 가능한 상품 수출 경쟁력을 제고할 수 있는 방안을 논의하였다.This study aims to re-verify the export competitiveness of Chinese goods to the U.S. based on the value chain perspective and improved index according to the SITC, considering the influence of the division of production on the trade relations, size and structure of the two countries after the 2008 financial crisis. In Section 8, China has a remarkable advantage in terms of export value, export intensity, export unit price, and trade complementarity compared to the US, which shows that it has export competitiveness to the US. In section 5 and section 6, China s export unit price to U.S. is relatively high, with the former’s trade deficit and the latter’s trade surplus to U.S. In section 7, the export unit price to U.S. is higher, but the export intensity is somewhat lower, which indicates China has relatively weak export competitiveness to U.S. in high technology intensive products. In order to further verify China s competitiveness in the US, Japan, India, Russia, Malaysia and Thailand were selected as the comparative subjects and analyzed. As a result, China s export competitiveness was found to be insignificant for the comparable countries, especially in the capital and technology-intensive industries for Japan. Based on this, China s economic scale, per capita income, technology research and development, institutional gap, and mutual direct investment factors were set as variables and panel empirical analysis using gravity model was conducted. The analysis showed that the gradual growth of the Chinese economy did not effectively improve its export competitiveness, and it was found that by absorbing direct investment from other countries in the past, China had caused technical difficulties and continued friction in foreign trade. While the improvement of foreign direct investment and its own institutional system played a positive role, it was found that it was difficult to improve the export competitiveness of Chinese goods in a short period of time because it was limited to the scale of foreign investment, host countries’ demand capacity and institutional supplementation. Finally, we discussed ways for China to enhance its competitiveness in exporting sustainable goods from both domestic and foreign perspectives.

The Liquidity Hierarchy in the US Treasury Cash and Futures Market

This article describes the complex nature of liquidity in the markets for US Treasury cash bonds and exchange-traded futures contracts. Using a risk-adjusted measure of trading volume, we find that, although overall volume is greater across all cash securities than across all futures contracts, certain futures contracts are more liquid than certain cash securities, and vice versa. Furthermore, futures contracts play a special role in liquidity-challenged environments. Finally, average trade size, in risk terms, is much higher for cash securities than for futures contracts. These findings can be useful to investment practitioners, who constantly weigh the relative values of various securities against their liquidity. TOPICS:Fixed Income and structured finance, futures and forward contracts, fixed-income portfolio management, exchanges/markets/clearinghouses Key Findings • This article combines the relatively new regulatory data on Treasury cash transactions from FINRA with futures transaction data at the CFTC to describe a liquidity hierarchy in the US Treasury market. • Although overall risk volume is greater across all cash securities than across all futures contracts, the liquidity hierarchy is more complex, with certain futures contracts more liquid than certain cash securities and vice versa. • Futures contracts play a special role in liquidity-challenged environments. The relative amount of risk traded through futures contracts is higher on days with large price movements and is larger at times outside of US trading hours.

Retaining alpha: The effect of trade size and rebalancing frequency on FX strategy returns

The literature on currency investing that incorporates transaction costs uses costs relevant for small trade sizes. Using the entire order book of the major electronic brokerages for FX, we compute sweep-to-fill costs for trades of different sizes and illustrate the reduction in post-cost returns as trade size increases. Researchers should consider trade size and frequency to create realistic forecasts of post-tcost returns to gauge the capacity of a strategy. We show how incorporating tcosts in the construction of a portfolio improves performance for both high and low frequency strategies and retains a larger portion of the alpha.

It's in the news: Characterising Indonesia's wild bird trade network from media-reported seizure incidents

Devising strategic conservation plans to curb Indonesia's wild bird trade is pivotal to protect species. However, limited understanding of nation-wide trade network patterns could hinder this urgently necessary action. Currently, available information either have restricted geographical scope or is focused on trans-national analysis, limiting understanding of domestic-level nation-wide spatial movement and patterns of traded birds. In this paper, we use media-reported local seizures to understand patterns in a domestic-level wild bird trade network. Indonesia's bird trade network involved 18 countries (including Indonesia), all 34 provinces, and 132,945 confiscated birds from 157 species. Songbirds (Passeriformes) (83.8% of all birds) dominated the trade, with the highest number of birds in demand for songbird competitions and listed as of conservation concern in the IUCN Red List. The most important region and the main transit point was Jakarta, the most important source of birds was Lampung and the most important destination for birds was West Java. Malaysia was the most important international source of songbirds (mostly smuggled into Indonesia), while the Philippines was the main international destination for the smuggling of Parrots and Cockatoos. Seizures mostly occur near transit and destination regions, and fewer near source regions. Despite the identified patterns, it is likely a small portion of the actual size of Indonesia's bird trade. This paper provided a low-cost approach for a rapid wildlife trade network analysis and could be easily used to identify trade patterns of other taxa in other countries.

Cumulative Market Impact of Consecutive Orders Over One and Two Days: How Long Does the Market Remember Past Trades?

In this paper, we want to address the question of market impact of consecutive orders over the same day and across two consecutive days. This question is key for traders who need to determine the best way to schedule their executions. This question is answered using a unique database of more than 260,000 trades with an amount of more than EUR250bn. Our main findings are the following: On the same day, the market impact of consecutive orders is not independent. The subsequent market impact for a given trade size is much smaller than the one of the initial order. Trading a larger order continuously or splitting this large order into two subsequent orders will lead to almost the same market impact over the same day. In other words, the market remembers earlier trades on the same day. Over two consecutive days, the market impacts are independent. The market impact on the second day and the market impact on the first day display identical results for different trades. Trading on the same day reduces the overall market impact for overall order sizes below 12% (in Average daily volume). This strong result backs the common market practice of spreading orders over two days only for larger order sizes that cannot be executed over one day. In other words, the market forgets standard trades that took place on the previous day.

Shipping emission inventories in China's Bohai Bay, Yangtze River Delta, and Pearl River Delta in 2018

Pollutant emissions from ships could increase with expanding international trade and shipping fleet size, posing a severe but often overlooked threat to public health. China houses the three biggest port clusters in the world: the Bohai Bay (BB), the Yangtze River Delta (YRD), and the Pearl River Delta (PRD) and must combat pollutant emissions. This study examines the emissions of key pollutants (i.e., NOX, PM10, PM2.5, HC, CO, SOX, CO2, NMVOC, and CH4) utilizing a bottom-up methodology with the aid of automatic identification system data. Our results show that among the three regions studied, ships in the YRD produce the most emissions, accounting for 47.84% of the combined total emissions in 2018. We evaluate the emissions from different ship types, operation modes, and discharge equipment. Container ships account for ~50% of all emissions, which are mainly generated during the cruising phase. Different power sources produce varying levels of pollutants owing to power, load, and discharge variations. In addition, ship emissions have seasonal characteristics, which are reflected by the decline trend recorded in February, July, August, and December. This baseline dataset could aid comparisons with historic or future emission data and help establish regulatory actions to improve air quality.

Choice-Based Airline Schedule Design and Fleet Assignment: A Decomposition Approach

We study an integrated airline schedule design and fleet assignment model for constructing schedules by simultaneously selecting from a pool of optional flights and assigning fleet types to these scheduled flights. This is a crucial tactical decision which greatly influences airline profit. As passenger demand is often substitutable among available fare products between the same origin-destination pair, we study an optimization model that integrates within it a passenger choice model for fare product selections. To tackle the formidable computational challenge of solving this large-scale network design problem, we propose a decomposition approach based on partitioning the flight network into smaller subnetworks by exploiting weak dependency in the network structure. The decomposition relies on a series of approximation analyses and a novel fare split problem to reliably measure the approximation quality introduced by the partition by optimally allocating fares of products shared by flights in different subnetworks. We present several reformulations by representing fleet assignment and schedule decisions using composite variables and formally characterize the relationship of their strengths. This gives rise to a new reformulation that is able to flexibly trade off strength and size. We conduct detailed computational experiments using two realistically sized airline instances to demonstrate the effectiveness of our approach. Under a simulated passenger booking environment with both perfect and imperfect forecasts, we show that the fleeting and scheduling decisions informed by our approach deliver significant and robust profit improvement over benchmark implementations and previous models in the literature.

Intraday Momentum in Chinese Commodity Futures Markets

Abstract In this paper, we study whether the intraday momentum exists in Chinese commodity futures markets. We first construct an open-interest-weighted index with the high-frequency data of all commodity futures traded and then examine the predictability of the last half-hour return with both in-sample and out-of-sample tests. Consistent with findings in other markets, we show that the first half-hour return can readily predict the last half-hour return. We further demonstrate that the magnitude of this intraday momentum varies with volatility, trading volume, trade size, the sign of the first half-hour return, the type of commodity futures, and the launch of night trading. Additionally, this intraday momentum does not result from data snooping but has economic significance and remains robust under different index weighting and predictor calculation methods.

Retaining Alpha: The Effect of Trade Size and Rebalancing Frequency on FX Strategy Returns

The literature on currency investing that incorporates transaction costs uses costs relevant for small trade sizes. Using the entire order book of the major electronic brokerages for FX, we compute sweep-to-fill costs for trades of different sizes and illustrate the reduction in post-cost returns as trade size increases. Researchers should consider trade size and frequency to create realistic forecasts of post-tcost returns to gauge the capacity of a strategy. We show how incorporating tcosts in the construction of a portfolio improves performance for both high and low frequency strategies and retains a larger portion of the alpha.

Country size and technology innovation: a comparative study of countries based on different levels of economic development

By using the panel vector autoregression (PVAR) model and panel data of 40 countries from 2001 to 2016, this paper empirically studies the influence of country size on technology innovation of developing and developed countries from three dimensions: population size, market size and trade size. The research shows that under the conditions of different development levels, country size plays a huge role in technology innovation. Among them, for the developed countries, the market size plays an important role in promoting their technology innovation, followed by the trade size. For the developing countries, the trade size is the key factor for the promotion of their technology innovation. The market size has little effect and the population size has a negative impact. On this basis, this paper puts forward some suggestions for the large developing countries to promote technology innovation based on the country size.