This paper provides a novel method for identifying informed institutional trading. I argue that, given an information signal about a stock, an investor’s tastes for certain characteristics of that stock can influence his decision to trade on the information. Thus, trades which deviate from an investor’s tastes are more likely to reflect information. I test this hypothesis with respect to invest...

For stocks traded on the Hong Kong Exchange, the median of five prices taken over the last minute of trading is currently chosen as the closing price. We introduce a stochastic control formulation to target such a median benchmark in an empirically justified model which takes the key microstructural features into account. We solve this problem by providing an explicit and efficient algorithm wh...

This study aims to explore the relationship between the disposition effect and herding behavior of investors trading Taiwanese information technology stocks. This study differs from previous literature in two aspects. First, in contrast with the earlier studies that focused on investigating investors’ herding behavior, this study explores the possibility that the disposition effect drives inves...

We predict stock markets using information contained in articles published on the Web. Mostly textual articles appearing in the leading and the most influential financial newspapers are taken as input. From those articles the daily closing values of major stock market indices in Asia, Europe and America are predicted. Textual statements contain not only the effect (e.g., stocks down) but also t...

a r t i c l e i n f o Keywords: Trading volume Buy–sell imbalance Financial crisis We confirm that investors in different categories have different trading patterns caused by attention-grabbing factors. Stocks with extreme one-day returns catch the attention of both individual and institutional investors. Individual investors are net buyers of losers whereas institutional investors are net buye...

Using a large proprietary database of institutional trades for the period 1999-2005, this paper examines the interim (i.e., intra-quarter) trading skills of institutional investors. We find strong evidence that institutional investors earn significant abnormal returns on their intra-quarter round-trip trades. Furthermore, the stocks institutions buy significantly outperform the stocks instituti...

The goal of this chapter is to examine whether the time series of returns of securities listed on Taiwan’s stock exchange exhibit significant nonlinear serial dependencies, as do those of other stock exchanges throughout the world, and, if so, to examine the pervasiveness of such dependencies across the individual stocks trading on the Taiwan Stock Exchange. First, an examination of the charact...

We study the problem of portfolio optimization in an incomplete market using derivatives as well as basic assets such as stocks. In such markets, an investor may want to use derivatives, as a proxy for trading volatility, for instance, but they should be traded statically, or relatively infrequently, compared with assumed continuous trading of stocks, because of the much larger transaction cost...

This study is the first to investigate the renowned stock message board effect by controlling for both firm effects and board effects. Presently it is the most comprehensive study on how online stock discussion forums affect stock performance. More specifically, firm effects include firm size, earning growth rate, and media coverage intensity. Board effects include sentiment, number of messages...

We provide an explanation for the explosive growth in the popularity of Stock Index Futures contracts. In our economy there are three broad classes of traders that place orders with a competitive market maker that sets a bid-ask spread arising from adverse selection. Informed traders trade on the basis of their private information about the value of particular securities. Liquidity traders trad...