Strategic Cross-Trading in the U.S. Stock Market*
نویسنده
چکیده
We model and test for the role of heterogeneously informed, strategic multi-asset speculation for cross-price impact—the impact of trades in one asset on the prices of other (even unrelated) assets—in the U.S. stock market. Our investigation of the trading activity in New York Stock Exchange (NYSE) and National Association of Securities Dealers Automated Quotation System (NASDAQ) stocks between 1993 and 2004 reveals that, consistent with our model, (1) daily order imbalance in one industry or random stock has a significant, persistent, and robust impact on daily returns of other (even unrelated) industries or random stocks; (2) cross-price impact is often negative; and (3) both direct (i.e., an asset’s own) and absolute (i.e., unsigned) cross-price impact are smaller when speculators are more numerous, greater when market-wide dispersion of beliefs is higher, and greater among stocks dealt by the same specialist. JEL Classification: D82, G14
منابع مشابه
Profitability of Momentum and Contrarian Strategies Based on Trading Volume in Tehran Stock Exchange: A Comparison of Emerging Market
In this study, the profitability of contrarian and momentum strategies were traded in mid- term based on trading volume. The stocks were categorized into three parts (high, middle and low) at the outset. Then, the relationship between excess return with three components such as cross-sectional risk, lead-lag effect and time-series pattern were examined based on Jegadeesh and Titman approach.The...
متن کاملMulti-Market Trading and Liquidity: Theory and Evidence
In this paper, we develop and test a theoretical model of multi-market trading to explain the differences in the foreign share of trading volume of internationally cross-listed stocks. The model derives an equilibrium which predicts that, under fairly general conditions, the distribution of trading volume across exchanges competing for order flow is related to the correlation of the cross-liste...
متن کاملNoise Trading Approach of Capital Asset Pricing at Tehran Stock Exchange
Noise traders as one of the key elements of the market play a significant role in determining the market volatilities, returns, and stock market mispricing. Hence, this study attempts to scrutinize the role of noise trading in capital asset pricing. Therefore, by using daily data, samples including 14105 data of 200 companies listed on stock exchange were selected and noise trading index was es...
متن کاملStudying the Monthly Effect on the Market Reactions Using Time-Space -Frequency Analysis (Case Study: Tehran Stock Exchange)
Anomaly is an incident or event that cannot be explained by the dominant theories. Anomalies are situated in confronting with the efficient market theory, so that it provides conditions for stock trading strategies with additional returns in case of existing predetermined returns. Therefore, in this study, the anomaly due to monthly effects on the stock volume trading and the Tehran Stock Excha...
متن کاملCosts of Stock Trading by Study on Commitment Components
In this paper, we are examining the relationship between stock trading costs and commitment components and find both abnormal and normal commitments associated with these costs are associated. Moreover, stock trading costs have a greater influence by both abnormal and normal negative commitments more than positive commitments. Further analysis has shown that in general, investors are unable to ...
متن کامل