Download or read book Adverse Selection Costs and the Dealers Bid ask Spread Around Earnings Announcements written by Niranjan H. Chipalkatti and published by . This book was released on 1993 with total page 636 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Earnings Announcements and the Components of the Bid Ask Spread written by Jason Lee and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the behavior of the components of the bid-ask spread around earnings announcements. The authors find that the adverse selection cost component significantly increases surrounding the announcements, while the inventory holding and order processing components significantly decline during the same periods. Their results suggest that the directional change in the total bid-ask spread depends on the relative magnitudes of the changes in these three components. Specifically, the decreases in inventory holding costs and order processing costs imply that earnings announcements may have an insignificant impact on the total bid-ask spread, even when they result in increased information asymmetry.Copyright 1996 by American Finance Association.
Download or read book BID ASKS AROUND EARNINGS ANNOUNCEMENTS EVIDENCE FROM THE NASDAQ NATIONAL MARKET SYSTEM written by DOUGLAS J. SKINNER and published by . This book was released on 1993 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Strategic Trading and Adverse selection Costs written by Hasan Pirkul and published by . This book was released on 1987 with total page 348 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.
Download or read book The Bid Ask Spread s Cost Components written by Steven V. Mann and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop and test a model that provides improved estimates of the bid-ask spread's cost components: order processing, adverse selection, and inventory control. The model incorporates three unique features: (1) a dealer's response to inventory imbalances is not static but depends on the size of the imbalance and the dealer's aversion to inventory risk; (2) active inventory management by a dealer will result in a stationary stochastic process for inventory; and (3) inventory management will influence the adverse selection cost component. We estimate the spread's components using intraday data for NYSE/AMEX and NASDAQ stocks. We also examine the impact of our model's features on the cost estimates. The results suggest inventory costs are higher and order processing costs are lower than previously reported.
Download or read book Bid ask Spreads Around Earnings Announcements written by Daniella Acker and published by . This book was released on 2000 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Three Essays on the Cost Components of the Bid ask Spread written by and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Adverse Selection and Re Trade written by Nicolae Garleanu and published by . This book was released on 2002 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many securities are traded repeatedly by asymmetrically informed investors. We study how current and future adverse selection affect the required return. We find that the bid-ask spread generated by adverse selection is not a cost, on average, for agents who trade, and hence the bid-ask spread does not directly influence the required return. Adverse selection leads to trading-decision distortions, however, implying allocation costs, which affect the required return. We derive explicitly the effect on required returns, and show that our result differs from models that consider the bid-ask spread to be an exogenous cost.
Download or read book Determinants of the Components of Bid Ask Spreads on Stocks written by Sung-Hun Kim and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we show that George, Kaul and Nimalendran's (GKN) estimators of the adverse selection and order processing cost components of the bid-ask spread are biased due to intertemporal variations in the bid-ask spread. We provide new estimators that correct this bias and that are applicable to individual securities, and estimate these cost components empirically using data on NYSE/AMEX stocks. As expected, our results indicate that on average adverse selection costs account for approximately 50 percent of the bid-ask spread, sharply higher than the estimates of 8-10 percent obtained by GKN for NASDAQ stocks and 21 percent that we obtain for NYSE/AMEX stocks using GKN's estimators. We then conduct cross-sectional regressions designed primarily to determine whether adverse selection costs vary across specialists after controlling for firm size and other factors. Consistent with previously-established hypotheses, we find that adverse-selection costs vary across specialists, and that this variation is related to the number of securities that the specialist handles.
Download or read book Does Adverse Selection Affect Bid Ask Spreads for Options written by Söhnke M. Bartram and published by . This book was released on 2019 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines two different option markets to test whether differences in the level of adverse selection faced by market makers affects the size of bid-ask spreads. The data are from bank-issued options that trade on EuWax, where market makers face little adverse selection and traditional options that trade on EuRex. The results support the hypothesis that the adverse selection component of the bid-ask spread is important as options on EuWax have lower bid-ask spreads than comparable options on EuRex. The results show that the adverse selection component represents at least half of the overall bid-ask spread on the traditional EuRex.
Download or read book Adverse Selection Costs and the Probability of Information Based Trading written by Kee H. Chung and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior studies offer various empirical models to decompose the observed bid-ask spread into the adverse-selection and transitory (order-processing and inventory-holding) components. There is limited evidence, however, on whether the spread components estimated from these models indeed measure what they purport to measure. In this study, we show that the estimates of the adverse-selection component given by these models are positively and significantly related to the probability of information-based trading (PIN), after controlling for the endogeneity of the PIN and other stock attributes. These results provide direct empirical support for the spread component models examined in the present study.
Download or read book Adverse Selection Squeezes and the Bid ask Spread on Treasury Securities written by Bradford Cornell and published by . This book was released on 1992 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Trading and Electronic Markets What Investment Professionals Need to Know written by Larry Harris and published by CFA Institute Research Foundation. This book was released on 2015-10-19 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: The true meaning of investment discipline is to trade only when you rationally expect that you will achieve your desired objective. Accordingly, managers must thoroughly understand why they trade. Because trading is a zero-sum game, good investment discipline also requires that managers understand why their counterparties trade. This book surveys the many reasons why people trade and identifies the implications of the zero-sum game for investment discipline. It also identifies the origins of liquidity and thus of transaction costs, as well as when active investment strategies are profitable. The book then explains how managers must measure and control transaction costs to perform well. Electronic trading systems and electronic trading strategies now dominate trading in exchange markets throughout the world. The book identifies why speed is of such great importance to electronic traders, how they obtain it, and the trading strategies they use to exploit it. Finally, the book analyzes many issues associated with electronic trading that currently concern practitioners and regulators.
Download or read book Adverse Selection Volume and Transactions Around Dividend Announcements in a Continuous Auction System written by Gonzalo Rubio and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that liquidity providers do not significantly respond to changes in information asymmetry risks, at least when we analyze their trading behavior around dividend announcements of a representative sample of stocks in a continuous auction trading mechanism. The implicit bid-ask spread does not seem to change beyond what is normally conveyed through an increased number of transactions. We also document that the information in the trading behavior of investors is primarily contained in the number of daily transactions.
Download or read book The Determinants of CDS Bid Ask Spreads written by Marcin Wojtowicz and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the determinants of bid-ask spreads on corporate credit default swaps (CDSs). We find that proxies for dealer inventory costs such as variability of CDS premia and CDS trading volume explain as much as 80% of variation in CDS bid-ask spreads. We also analyze the influence of variables capturing systematic risk of reference entities, market-implied volatility, dealer funding costs and competition between dealers. Several of these variables are significant, but their explanatory power is moderate. Finally, we demonstrate that CDS bid-ask spreads do not widen preceding earnings announcement surprises, which suggests that private information does not hinder CDS liquidity.
Download or read book Bid ask Spreads Around Earnings Announcements written by Douglas J. Skinner and published by . This book was released on 1992 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt:
