Download or read book Essays On Trading Strategy written by Graham L Giller and published by World Scientific. This book was released on 2023-08-17 with total page 217 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book directly focuses on finding optimal trading strategies in the real world and supports that with a well-defined theoretical foundation that allows trading strategy problems to be solved. Critically, it also delivers a menu of actual solutions that can be applied by traders with various risk profiles and objectives in markets that exhibit substantial tail risk. It shows how the Markowitz approach leads to excessive risk taking, and trader underperformance, in the real world. It summarizes the key features of Utility Theory, the deficiencies of the Sharpe Ratio as a statistic, and develops an optimal decision theory with fully developed examples for both 'Normal' and leptokurtotic distributions.

Download or read book Essays on Trading Strategies Corporate Activities and Firm Performance written by Siqi Liu and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Trading Strategies and Long Memory written by Dooruj Rambaccussing and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Present value based asset pricing models are explored empirically in this thesis. Three contributions are made. First, it is shown that a market timing strategy may be implemented in an excessively volatile market such as the S&P500. The main premise of the strategy is that asset prices may revert to the present value over time. The present value is computed in real-time where the present value variables (future dividends, dividend growth and the discount factor) are forecast from simple models. The strategy works well for monthly data and when dividends are forecast from autoregressive models. The performance of the strategy relies on how discount rates are empirically defined. When discount rates are defined by the rolling and recursive historic average of realized returns, the strategy performs well. The discount rate and dividend growth can also be derived using a structural approach. Using the Campbell and Shiller log-linearized present value equation, and assuming that expected and realized dividend growth are unit related, a state space model is constructed linking the price-dividend ratio to expected returns and expected dividend growth. The model parameters are estimated from the data and, are used to derive the filtered expected returns and expected dividend growth series. The present value is computed using the filtered series. The trading rule tends to perform worse in this case. Discount rates are again found to be the major determinant of its success. Although the structural approach offers a time series of discount rates which is less volatile, it is on average higher than that of the historical mean model. The filtered expected returns is a potential predictor of realized returns. The predictive performance of expected returns is compared to that of the price-dividend ratio. It is found that expected returns is not superior to the price-dividend ratio in forecasting returns both in-sample and out-of-sample. The predictive regression included both simple Ordinary Least Squares and Vector Autoregressions. The second contribution of this thesis is the modeling of expected returns using autoregressive fractionally integrated processes. According to the work of Granger and Joyeux(1980), aggregated series which are derived from utility maximization problems follow a Beta distribution. In the time series literature, it implies that the series may have a fractional order (I(d)). Autoregressive fractionally models may have better appeal than models which explicitly posit unit roots or no unit roots. Two models are presented. The first model, which incorporates an ARFIMA(p,d,q) within the present value through the state equations, is found to be highly unstable. Small sample size may be a reason for this finding. The second model involves predicting dividend growth from simple OLS models, and sequentially netting expected returns from the present value model. Based on the previous finding that expected returns may be a long memory process, the third contribution of this thesis derives a test of long memory based on the asymptotic properties of the variance of aggregated series in the context of the Geweke Porter-Hudak (1982) semiparametric estimator. The test makes use of the fact that pure long memory process will have the same autocorrelation across observations if the observations are drawn at repeated intervals to make a new series. The test is implemented using the Sieve-AR bootstrap which accommodates long range dependence in stochastic processes. The test is relatively powerful against both linear and nonlinear specifications in large samples.

Download or read book Three Essays on Strategic Trading in Oligopolistic Economies written by Alexei Boulatov and published by . This book was released on 2004 with total page 328 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book From Here to Free Trade written by Ernest H. Preeg and published by University of Chicago Press. This book was released on 1998-05-13 with total page 174 pages. Available in PDF, EPUB and Kindle. Book excerpt: In his new book, Ernest Preeg analyzes international trade and investment in the 1990s and lays out a comprehensive U.S. trade strategy for the uncertain period ahead. He examines the influence of the World Trade Organization (WTO) and argues that economic globalization is beneficial to the U.S. economy in the short- to medium-term while raising important questions about national sovereignty and security over the longer term. Preeg believes regional free trade agreements will soon encompass the majority of world trade, but they can conflict with the WTO's multilateral objectives. The central challenge for U.S. trade strategy, then, is to integrate the now largely separate multilateral and regional tracks of the world trading system. The first essay assesses U.S. interests in economic globalization, the second examines recent steps toward free trade at the multilateral and regional levels, and the next three offer an in-depth critique of U.S. regional free trade objectives in the Americas, across the Pacific, and possibly with Europe. The final essay presents a multilateral/regional synthesis for going from here to free trade over the coming decade.

Download or read book Adventures In Financial Data Science The Empirical Properties Of Financial And Economic Data Second Edition written by Graham L Giller and published by World Scientific. This book was released on 2022-06-27 with total page 512 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides insights into the true nature of financial and economic data, and is a practical guide on how to analyze a variety of data sources. The focus of the book is on finance and economics, but it also illustrates the use of quantitative analysis and data science in many different areas. Lastly, the book includes practical information on how to store and process data and provides a framework for data driven reasoning about the world.The book begins with entertaining tales from Graham Giller's career in finance, starting with speculating in UK government bonds at the Oxford Post Office, accidentally creating a global instant messaging system that went 'viral' before anybody knew what that meant, on being the person who forgot to hit 'enter' to run a hundred-million dollar statistical arbitrage system, what he decoded from his brief time spent with Jim Simons, and giving Michael Bloomberg a tutorial on Granger Causality.The majority of the content is a narrative of analytic work done on financial, economics, and alternative data, structured around both Dr Giller's professional career and some of the things that just interested him. The goal is to stimulate interest in predictive methods, to give accurate characterizations of the true properties of financial, economic and alternative data, and to share what Richard Feynman described as 'The Pleasure of Finding Things Out.'

Download or read book Essays on the Performance of Option Trading Strategies written by Zhuo Li and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two parts. In the first chapter, we examine the relative performance of four options-based investment strategies versus a buy-and-hold strategy in the underlying stock. Specifically, using ten stocks widely held in 401(k) plans, we examine monthly returns from strategies that include a long stock position as one component. These strategies are long stock, covered call, protective put, collar, and covered combination. Ignoring early exercise for simplicity, we find that the covered combination and covered call strategies generally outperform the long stock strategy, which in turn generally outperforms the collar and protective put strategies regardless of the performance measure considered. Clearly, from the first chapter, strategies that involve writing options, in general, outperform the ones buying options. The second chapter provides a detailed study of the conditions where option writers can maximize returns while minimizing risk. The nonlinear nature of time value decay in options suggests that, theoretically, holding short positions only when the speed of time decay is high might improve the performance of option writing strategies. We examine monthly returns from five option strategies without a position in the underlying asset. These strategies are: short straddle, short strangle, short guts, “crash-neutral” short straddle, and long iron butterfly. The results from two portfolios are compared: a “benchmark” portfolio using standard SPX options that expire the following month and a weekly portfolio using SPXW options that expire at the end of the weekly holding period. The short strangle strategy with weekly options consistently outperforms the other strategies with both standard and weekly options, even after accounting for transaction costs. This finding suggests that short-dated out-of-the-money options can be useful in improving the risk-return characteristics of an option writing strategy. In an effort to improve the performance of the short straddle strategy, this chapter introduces an extremely short holding period portfolio, by stitching together three weekly option expirations into one week. Although the straddle still underperforms relative to the short strangle, the performance of the short straddle is improved by entering the market 15 minutes before the close and by using the extremely short holding period portfolios.

Download or read book Essays on Trades and Security Prices written by Anna Obizhaeva and published by . This book was released on 2007 with total page 165 pages. Available in PDF, EPUB and Kindle. Book excerpt: (cont.) For instance, the price impact coefficients relate positively to the market capitalization and to the amount of noise trading; they increase during buy "packages" and decrease during sell "packages"; finally, total price impact is concave in trade size, fitting well the square-root specification, however, surprisingly, its permanent component is also non-linear. In the last chapter, based on joint work with Jiang Wang, we study how security prices affect trading strategies. The supply/demand of a security in the market is an intertemporal, not a static, object and its dynamics is crucial in determining market participants' trading behavior. We show that the dynamics of the supply/demand, rather than its static properties, is of critical importance to the optimal trading strategy of a given order. Using a limit-order-book market, we develop a simple framework to model the dynamics of supply/demand and its impact on execution cost. We demonstrate that the optimal execution strategy involves both discrete and continuous trades, not only continuous trades as previous work suggested. The cost savings from the optimal strategy over the simple continuous strategy can be substantial. We also show that the predictions about the optimal trading behavior can have interesting implications on the observed behavior of intraday volume, volatility and prices.

Download or read book Three Essays in Financial Markets The Bright Side of Financial Derivatives Options Trading and Firm Innovation written by Iván Blanco and published by Ed. Universidad de Cantabria. This book was released on 2019-02-15 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Essays on Strategic Thinking and Trading Behaviors written by Hang Zhou and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Strategic thinking pervades human interactions. In a complex world where the consequences are determined by the joint actions of related groups, it is natural and sometimes critical to anticipate the reactions of others and take those into account. The most well-developed theory of strategic interaction is the game theoretical notion of Nash equilibrium. In this model, equilibrium is defined as the collection of strategies such that every player maximizes the expected payoff, given the strategy of others. In addition, the epistemic game theory finds mutual knowledge of rationality to be a necessary condition for Nash equilibrium. However, experimental economics have documented much evidence which challenges Nash equilibrium as the best prediction of strategic interactions. In addition, behavioral game theorists have developed several structural non-equilibrium models that systematically deviate from Nash equilibrium. For instance, the level-k thinking model and the cognitive hierarchy model both assume players adjust their strategies through iterated best responses. Both models introduce levels of sophistication, characterized by the rounds of iterated reasoning, as a predictor of strategic interactions. Experiments suggest that in general, these models outperform Nash equilibrium in terms of predicting the outcome of strategic interactions. My dissertation focuses on understanding the effect of strategic sophistication in market environments. Namely, I study how trading behaviors are determined by participants' levels of reasoning with an emphasis on financial markets. The first chapter of my dissertation investigates the effect of strategic reasoning on financial markets with a level-k thinking framework. A level-k speculator performs k rounds of iterative reasoning to infer information from asset prices. In contrast to the rational expectations equilibrium, the level-k framework produces a unified theory of momentum and contrarian trading strategies. I discuss how the distribution of sophistication levels affects several market variables and sheds new light on empirical patterns such as : (1) overreaction of asset prices, (2) the excess volatility puzzle, and (3) the excessive trading volume puzzle. Moreover, I find the sufficient conditions that thelevel-k strategy converges to the rational expectation equilibrium. The second chapter is joint work with Andr ́es Carvajal. In this paper, we incorporate the insight from level-k literature to a general equilibrium setting of financial markets. We ask the question whether suffcient sophistication on the reasoning of financial traders lead to rational expectations equilibrium and provides an answer. We study a simple exchange economy with complete markets and asymmetric information. Traders are classified as fundamentalists, who know the true probability distributions of random shocks, or speculators, who try to infer the true probabilities from asset prices. We characterize the necessary conditions on convergence to rational expectations equilibrium for some specific utility functions and discuss the general case. Our results are that: (1) convergence to rational expectations requires that speculators have less market impact than fundamentalists; (2) convergence, when it takes place, occurs in an oscillating manner; and (3) asset prices can be more volatile than at rational expectations equilibrium when speculators display low sophistication. The third chapter is joint work with Burkhard Schipper. In this paper, we consider the extension of level-k thinking to extensive-form games. Players may learn about their opponents' levels during the game because some information sets are not consistent with certain levels. In particular, for any information set reached, a level-k player attaches the maximum level-l thinking for l

Download or read book Three Essays on Financial Markets written by Cagdas Tahaoglu and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays that address recent topics in financial markets that concern for scholars, policymakers, and investors. The first essay examines the benefits of international diversification for US investors, while accounting for market development, corporate governance, market cap effects, and structural change across countries over period August 1996 -July 2013. Improved risk adjusted returns are obtained from a diversified portfolio consisting of a mix of developed and emerging countries. Additionally, we find that diversification benefits are not significant for most of the small-cap foreign assets when an investor already holds position in corresponding countries large-cap assets. Diversification benefits based on the governance effectiveness of a country's companies are not ubiquitous. We find that economically significant improvements in risk-return performance can be attained by adding large caps of developed countries with high and low overall Governance Metrics International (GMI) ratings and large and small caps of emerging countries with low overall GMI ratings to the investment universe containing the assets of common law developed countries. However, diversification benefits are economically significant only for large and small caps of low GMI emerging countries when short selling is not allowed. The second essay looks at the market impact of recent regulatory changes in Canada that provide for trading halts on individual stocks that experience large upside or downside movements. The focus is on all stocks traded on the Toronto Stock Exchange since the inception of the single stock circuit breaker rule (SSCB) in February 2012, to replace the short-sale uptick rule. The results support pricing efficiency: material information that caused the circuit breaker is incorporated in stock prices on the day of the halt (neither overreaction nor underreaction), with no decline in market liquidity. Using trade-by-trade data constructed on 5-minute trading intervals, we refine the daily results, and show that shocks in realized volatility are focused in the ten-minute trading interval surrounding the halts. While circuit breakers provide a limited "safety net" for investors when their stocks are subject to severe volatility, they do not provide for a quick turnaround for stocks experiencing severe price decline events. The last essay re-examines the historical vs implied volatility spread anomaly, reported by Goyal and Saretto (2009) using a second-order stochastic dominance (SSD) criterion. The approach incorporates transaction frictions, and is robust to model specification problems, return distributions, as well as preferences. It is found that option trading frictions such as cash collateral requirements and option trading costs significantly reduce but do not eliminate returns to a long-short straddle trading strategy pre-2006 period. However, the anomaly disappears after 2006, consistent with market efficiency. The SSD test results confirm the findings.

Download or read book Simple Trading Strategies That Work written by and published by Abrazol Publishing. This book was released on with total page 187 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Two Essays on Short Selling written by EunJu Lee and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two essays on short sellers' trading behavior. The first essay examines if short sellers exploit temporary mispricing in the equity market. Using a mispricing indicator that measures deviations from a stock's fundamental value, we find higher levels of short selling for temporarily overvalued stocks. The result is robust to controlling for short sale constraints and illiquidity, and it is more pronounced when short sale constraints do not bind and stocks are liquid. The result also remains intact after controlling for short sellers' reaction to fundamental information. We find that short sellers contribute to market quality by correcting overpricing quickly over time, but do not destabilize the stock market. The second essay documents trading activity of short sellers through the examination of intraday patterns in short sales. We find a U-shaped intraday pattern in short sales across the trading day. This pattern is robust to controlling for short trade size, market capitalization, and institutional ownership. We also find a positive association between short selling and past returns across the trading day, and this result is more pronounced in the first and last half hours of the day. A trading strategy based on intraday short sales generates the highest returns at the open of the trading day. Overall, the results suggest that high levels of short sales at the market open are attributed to strategic trading by informed short sellers. High levels of effective spreads and volatility at the open also support our findings.

Download or read book Three Essays on Trading Volume written by Youngseog Park and published by . This book was released on 1990 with total page 218 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Two Essays on Stock Markets written by Wei Dong and published by Open Dissertation Press. This book was released on 2017-01-26 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation, "Two Essays on Stock Markets" by Wei, Dong, 董炜, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract:  This thesis contains two pieces of empirical study on market efficiency. The first essay tests the semi-strong form of market efficiency in the U.S. We use sell-side analyst target prices as publically available information and test the performance of a mean-variance optimized portfolio which is based on the Treynor and Black model. We focus on constituents of S&P 500 index as our sample universe. During the period of beck-testing from 2004 to 2010, we find that the dynamically rebalanced portfolio beats the market in 6 out of 7 years and that the strategy generates significant risk-adjusted abnormal returns. In the second essay we study the post-earnings-announcement drift (PEAD) phenomenon, a well-documented market anomaly, on the French stock market. Our empirical study devises a difference-in-difference policy experiment to test if trading activities by individual investors contribute to the magnitude of PEAD. We exploit a recent policy reform on the French stock market, which significantly increased speculative trading costs of individual investors and reduced their trading activities. The impact of reform is found twice as large on individual contrarian traders than momentum traders. Using a group of unaffected stocks to control for potential non-experimental factors, we find magnitude of PEAD dropped significantly after the reform in the experimented group but not in the experimented group but not in the control group. DOI: 10.5353/th_b5066221 Subjects: Stock exchanges Efficient market theory

Download or read book Essays on Market Microstructure written by Yoichi Otsubo and published by . This book was released on 2011 with total page 85 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first essay analyzes the market microstructure of the European Climate Exchange (ECX), the largest European Union Emissions Trading Scheme trading venue. Spreads range from 2 to 6 times the minimum tick increment on European Union Allowances (EUA) futures. Market impact estimates imply that an average trade will move the EUA market by 1.08 euro centimes. Information shares imply that approximately 90% of price discovery is taking place in the ECX futures market. We find imbalances in the order book help predict returns for up to three days. A simple trading strategy that enters the market long or short when the order imbalance is strong is profitable even after accounting for spreads and market impact. The second essay provides a case that the Thompson-Waller (TW) estimator would have downward bias, which has not been carefully discussed in the literature. Such case is that (i) the buy (sell) order tends to follow buy (sell) order and (ii) the price changes associated to such orders are small. The upward bias of the TW estimator would be canceled out by the downward bias, and in such case the estimator would perform better than the other absolute price change methods. The application to the EUA futures contract trading implies that its trading pattern and the price change provide the conditions that reduce the bias of the TW estimator. The Madhavan, Richardson and Roomans model is applied to examine the spread component of the market. A dominance of asymmetric information component in the spread is found. The fraction of the spread attributable to that component increases gradually during the observation period. The final essay examines price discovery of Japanese companies' Tokyo-New York cross-listed shares. Kalman filter is utilized to estimate partial price adjustment model. By employing Kalman filter, the present research can deal with missing values problem researchers has to confront in order to analyze non-overlapping markets such as Tokyo and New York. I find that events with larger magnitude of efficient price change occur during Tokyo opening hours. Dynamic measure shows that New York Stock Exchange is more efficient in price discovery.

Download or read book Three Essays in Finance written by Vivek Sharma and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation research comprises three essays in finance. The first essay shows how dynamic institutional trading constraints related to capital, diversification, and short- selling asymmetrically affect the incorporation of new information as reflected in the Permanent price impact of their trades. The sign of the permanent price impact asymmetry between institutional buys versus sells is positive at the initial stage of a price run-up and reverses due to changing constraints with a prolonged price run-up in a stock. Idiosyncratic volatility, analyst forecast dispersion, trading intensity, price dispersion, and bullish market conditions further sharpen the initial asymmetry, as well as its reversal after a price run-up. The second essay we provide a new explanation for the post-earnings announcement drift (PEAD). We hypothesize that the PEAD results from information production and the drift observed is a movement towards the changes in expectations and not an under-reaction or delayed response to the earnings announcement. We create a new measure that captures the changes in expectations over and above the earnings surprise. Our proxy is based on annual EPS forecasts by equity research analysts and takes into consideration both the responsiveness and the magnitude of the net changes in EPS forecasts. A long-short trading strategy based on portfolios formed using our new measure generates higher returns compared to portfolios formed based on the earnings surprise measure. Most importantly, the earnings surprise based portfolio rankings lose its significance in explaining the PEAD when considered together with our new measure based portfolio ranking. In the third essay, we study trading by institutional investors around delayed disclosures. A disclosure is said to be delayed if there is a gap between the event date and the actual announcement of the event. We show that connected institutional trading can predict the information contained in these events, prior to it being disclosed.