The Decline Of Informed Trading In The Equity And Options Markets
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| Author | : Charles Cao |
| Publisher | : |
| Total Pages | : |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
Reliable excess returns from active portfolio management derive from informed trading. We investigate the information content of informed trading in the equity market and the options market. We find that informed equity trading and options trading are positively correlated in the time-series, but virtually uncorrelated cross-sectionally. Portfolio-level and stock-level analyses provide robust evidence that the cross-sectional return predictive power of informed trading in each market is distinct. Time-series analyses indicate that aggregate informed options trading is useful for predicting market returns, but that the amount of informed trading has declined significantly in more recent years. The time-series patterns of both our informed trading measures coincide closely with the decline in equity hedge fund excess returns.
| Author | : Marco Klapper |
| Publisher | : Anchor Academic Publishing (aap_verlag) |
| Total Pages | : 70 |
| Release | : 2014-02-01 |
| Genre | : Business & Economics |
| ISBN | : 3954896729 |
This study examines the kind of information ‘informed’ traders have prior to a takeover announcement using options of target firms and elaborates on the cross-sectional relationship between options and stocks around takeover announcements. Financial markets are driven by information and by individuals that generate, process, and disclose this information to the market. Naturally, there have to be individuals who possess more information about a firm or a future event than other market participants. Mergers and acquisitions are particularly interesting events in this regard because they can have significant implications for the firms and stakeholders involved, as well as for the competitive dynamics in the respective market. Because of the large potential price impact of such transactions, traders with private information about a prospective takeover are expected to trade on this information to make a profit. But who are these ‘informed traders’ and what kind of information do they possess? This study tries to give a respond to this question.
| Author | : Hamed Khadivar |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2021 |
| Genre | : |
| ISBN | : |
How pervasive is informed trading around takeover rumors? This dissertation tackles this research question from three different following aspects. First, we examine insider trading surrounding takeover rumors in a sample of publicly traded U.S. firms. We find that insider net-purchases increase within the year prior to the first publication of a takeover rumor, particularly when rumor articles are either accurate (lead to a takeover announcement) or informative (provide substantial justification for the rumor's publication). Moreover, we find abnormal insider trading to be a significant predictor of takeover announcements occurring within the following year. Finally, trading patterns differ between different types of insiders in both the pre- and post-rumor periods. Second, we examine the possibility of informed institutional trading around takeover rumors. We find that pension plan sponsors and money managers are net-buyers in firms which will become subject to takeover speculation within the following seven days. This activity is significant in predicting which rumored firms will eventually receive takeover bids. Furthermore, we find that institutions on average reverse their trades and engage in significant selling on and after the rumor date, even in those firms which will become subject to a takeover announcement. Third, we investigate and quantify the pervasiveness of informed trading in the equity options of rumored takeover targets. We find that the volume of options traded is abnormally high over the 5-day pre-rumor period, primarily due to the number of out-of-the-money call options traded. In addition, the direction of option trades prior to takeover rumors predicts forthcoming takeover announcements and rumor date returns. Identifying suspicious trades, we find evidence of individuals trading on knowledge of takeover rumor candidacy in the options market. Our results further indicate that informed traders prefer the options market to the equity market.
| Author | : Nathan Bell |
| Publisher | : Youcanprint |
| Total Pages | : 666 |
| Release | : 2021-08-25 |
| Genre | : Business & Economics |
| ISBN | : |
Have you been desiring to start trading different financial instruments like stocks and options but have been hesitant about it because you don't know where to start? And are you looking for a guide that will cover the A-Z in simple, step by step language that you can follow with ease and apply that information to profit from stocks and options trading, while keeping your exposure to risks low? If you've answered YES, keep reading… You Are About To Discover The Secrets That Successful Traders Don't Want To Share With The Unsuccessful Ones And How To Apply This Information To Profit From Stocks And Options Trading, Just Like The Pros! By virtue that you are reading this, it is clear you've across the concept of stock and options trading somewhere, got drawn to it and are curious to learn more about it so that you too can venture into trading stocks and options fully aware of how to go about it. It is also likely that you are scared of losing money as you begin this journey and are probably looking for answers to all the questions going through your mind… Where do you start as far as trading financial assets is concerned? What do you need to learn? How do you analyze the markets so as to make informed trading decisions? What are the dos and don'ts you need to be aware of? How do you mitigate your exposure to risks? Which broker should you use – what steps do you need to take to begin? If you have these and other related questions, this 3 in 1 book is for you so keep reading… In it, you will learn: • The basics of options, including what they are, how they work, their pricing, the categories and the lingo used in options trading • Why you should venture trading in options, including the risks that come with that • What makes a successful options trader • How to buy, sell or exercise options, including how to select the right options strategy • How to buy call or put options professionally • How to sell covered call options and naked call options like a pro • The ins and outs of options trading time frames • How to trade signals and avoid mistakes in options trading • How to choose the right trades • Powerful tips for success • How to find the perfect broker • How to figure out the market phases • The difference between call options and put options • How to manage your portfolio • How to make prudent trade exits • The options mistakes beginners make that you need to avoid • How the stock market works • How to know whether the stock market is for you • The myths about the stock market • How to become a successful stock market investor • How to make your first stock purchase • How to minimize losses and maximize gains • How to begin investing in stocks with $100 or less • How to turn your stock portfolio into a cash flow machine • How to trade momentum stocks • How to leverage the insider tricks that professional traders use • How to identify a stock that is just about to explode higher …And much, much more! Are you ready to get started on your journey to building a six-figure income by following the footsteps of the most successful traders, even if you are a complete beginner? This simple, practical and fun to read guide is here to guide you! Click Buy Now With 1-Click or Buy Now to get started!
| Author | : Heather Elise Tookes |
| Publisher | : |
| Total Pages | : 592 |
| Release | : 2003 |
| Genre | : |
| ISBN | : |
| Author | : Iván Blanco |
| Publisher | : Ed. Universidad de Cantabria |
| Total Pages | : 90 |
| Release | : 2019-02-15 |
| Genre | : Business & Economics |
| ISBN | : 8481028770 |
Do financial derivatives enhance or impede innovation? We aim to answer this question by examining the relationship between equity options markets and standard measures of firm innovation. Our baseline results show that firms with more options trading activity generate more patents and patent citations per dollar of R&D invested. We then investigate how more active options markets affect firms' innovation strategy. Our results suggest that firms with greater trading activity pursue a more creative, diverse and risky innovation strategy. We discuss potential underlying mechanisms and show that options appear to mitigate managerial career concerns that would induce managers to take actions that boost short-term performance measures. Finally, using several econometric specifications that try to account for the potential endogeneity of options trading, we argue that the positive effect of options trading on firm innovation is causal.
| Author | : Merritt B. Fox |
| Publisher | : Columbia University Press |
| Total Pages | : 612 |
| Release | : 2019-01-08 |
| Genre | : Business & Economics |
| ISBN | : 023154393X |
The U.S. stock market has been transformed over the last twenty-five years. Once a market in which human beings traded at human speeds, it is now an electronic market pervaded by algorithmic trading, conducted at speeds nearing that of light. High-frequency traders participate in a large portion of all transactions, and a significant minority of all trade occurs on alternative trading systems known as “dark pools.” These developments have been widely criticized, but there is no consensus on the best regulatory response to these dramatic changes. The New Stock Market offers a comprehensive new look at how these markets work, how they fail, and how they should be regulated. Merritt B. Fox, Lawrence R. Glosten, and Gabriel V. Rauterberg describe stock markets’ institutions and regulatory architecture. They draw on the informational paradigm of microstructure economics to highlight the crucial role of information asymmetries and adverse selection in explaining market behavior, while examining a wide variety of developments in market practices and participants. The result is a compelling account of the stock market’s regulatory framework, fundamental institutions, and economic dynamics, combined with an assessment of its various controversies. The New Stock Market covers a wide range of issues including the practices of high-frequency traders, insider trading, manipulation, short selling, broker-dealer practices, and trading venue fees and rebates. The book illuminates both the existing regulatory structure of our equity trading markets and how we can improve it.
| Author | : John C. Cox |
| Publisher | : Prentice Hall |
| Total Pages | : 518 |
| Release | : 1985 |
| Genre | : Business & Economics |
| ISBN | : |
Includes the first published detailed description of option exchange operations, the first published treatment using only elementary mathematics and the first step-by-step procedure for implementing the Black-Scholes formula in actual trading.
| Author | : Deniz Ozenbas |
| Publisher | : Springer Nature |
| Total Pages | : 111 |
| Release | : 2022 |
| Genre | : Business enterprises |
| ISBN | : 3030748170 |
This open access book addresses four standard business school subjects: microeconomics, macroeconomics, finance and information systems as they relate to trading, liquidity, and market structure. It provides a detailed examination of the impact of trading costs and other impediments of trading that the authors call rictions It also presents an interactive simulation model of equity market trading, TraderEx, that enables students to implement trading decisions in different market scenarios and structures. Addressing these topics shines a bright light on how a real-world financial market operates, and the simulation provides students with an experiential learning opportunity that is informative and fun. Each of the chapters is designed so that it can be used as a stand-alone module in an existing economics, finance, or information science course. Instructor resources such as discussion questions, Powerpoint slides and TraderEx exercises are available online.
| Author | : Larry Harris |
| Publisher | : OUP USA |
| Total Pages | : 664 |
| Release | : 2003 |
| Genre | : Business & Economics |
| ISBN | : 9780195144703 |
Focusing on market microstructure, Harris (chief economist, U.S. Securities and Exchange Commission) introduces the practices and regulations governing stock trading markets. Writing to be understandable to the lay reader, he examines the structure of trading, puts forward an economic theory of trading, discusses speculative trading strategies, explores liquidity and volatility, and considers the evaluation of trader performance. Annotation (c)2003 Book News, Inc., Portland, OR (booknews.com).
