Algorithmic Trading and Challenges on Retail Investors in Emerging Markets

Algorithmic trading in the Iowa electronic markets

The Iowa Electronic Markets are small, real-money financial markets designed to aggregate information about future events. The market microstructure of these markets is studied and a market making model is developed to provide liquidity for one set of securities offered by this exchange. A computer program was created to employ the market making model and profit from the market’s inefficiencies...

Strategic trading against retail investors with loss - aversion

In this paper, we study a model incorporating the retail trader's reluctance to sell into losses. We show that in this setup the informed trader always buys the asset when he receives a favorable signal. However, when the informed trader receives an unfavorable signal, he may not always sell the asset if the signal is moderately bad and the retail trader is reluctant to realize losses. Hence th...

Forward Bias Trading in Emerging Markets

This paper investigates the returns to forward bias-trading in dynamic multi–currency strategies in order to empirically assess the limits to speculation hypothesis in foreign exchange markets. The results suggest that bias–trading strategies allow for economically significant excess returns, represent attractive diversification devices, and contain low downside risk. Furthermore, enriching car...

Managers, Investors, and Crises: Mutual Fund Strategies in Emerging Markets

Big Fish in Small Ponds: the Trading Behaviour and Price Impact of Foreign Investors in Asian Emerging Equity Markets

This paper analyses data for the aggregate daily trading of all foreign investors in six Asian emerging equity markets and provides two new findings. First, foreigners’ flows into several markets show positive-feedback trading with respect to global, as well as domestic, equity returns. In particular, foreigners tend to be buyers in these markets on the day after rises in these markets or in US...