Download or read book Strategic Trading and Learning about Liquidity written by Harrison Hong and published by . This book was released on 2000 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Strategic Trading and Learning About Liquidity written by Sven Rady and published by . This book was released on 2009 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many practitioners point out that the speculative profits of institutional traders are eroded by the difficulty in gauging the price impact of their trades. In this paper, we develop a model of strategic trading where speculators face such a dilemma because of incomplete information about time-varying market liquidity. Unlike the competitive market makers that they trade against, informed traders do not know whether the liquidity (quot;noisequot;) trades are generated from a distribution with high or low variance. Instead, they have to learn about liquidity from past prices and trading volume. Extreme price deviations from forecasts of fundamentals based on public news or low trading volume tend to lead to revisions of beliefs in favor of the low liquidity state. This revision in beliefs implies that strategic trades and market statistics such as informational efficiency are path-dependent on past market outcomes. Our paper has a number of normative implications for practitioners concerned with gauging the potential price impact of their trades.

Download or read book Strategic Trading in Illiquid Markets written by Burkart Mönch and published by Springer Science & Business Media. This book was released on 2006-01-13 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Area of Research and the Object of Investigation In this thesis we will investigate trading strategies in illiquid markets from a market microstructure perspective. Market microstructure is the academic term for the branch of financial economics that investigates trading and the organization of security markets, see, e. g. , Harris (2002). Historically, exchanges evolved as a location, where those interested in buy ing or selling securities could meet physically to transact. Thus, traditionally security trading was organized on exchange floors, where so-called dealers arranged all trades and provided liquidity by quoting prices at which they were willing buy or sell. Consequently, the initial surge of the market mi crostructure literature focused predominantly on this type of market design, which is often referred to as quote-driven. Nowadays, the interest is shifting towards order-driven markets. Beginning with the Toronto Stock Exchange in the mid 1970s and increasing in fre quency and scope, this market structure has emerged as the preeminent form of security trading worldwide. In order-driven markets, exchanges arrange trades by matching public orders, often by employing automatic execution systems. Introduction A major difference between a quote-driven and an order-driven market arises from the transparency pre- and post-trade. The pre-trade transparency con cerns the question whether the order book is visible to the keeper only, or whether it is open to the public.

Download or read book Strategic Trading and Learning about Liquidity written by Harrison G. Hong and published by . This book was released on 2000 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Activism Strategic Trading and Liquidity written by Kerry E. Back and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Activism Strategic Trading and Liquidity written by Kerry Back and published by . This book was released on 2016 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze dynamic trading in an anonymous market by an activist investor who can expend costly effort to affect firm value. We obtain the equilibrium in closed form for a general activism technology, including both binary and continuous outcomes. The optimal continuous trading strategy is independent of the activism technology. Activism, prices, and liquidity are jointly determined in equilibrium. Variation in noise trading volatility can produce either positive or negative effects on both efficiency and liquidity, depending on the activism technology and model parameters, because future effort depends on the realized amount of noise trading. The 'lock in' effect emphasized in previous literature (e.g., Maug (1998)) holds only for special forms of the activism technology. Reducing the uncertainty about the activist's position improves market liquidity, but the effect on efficiency depends on the specification of the effort cost function. Variation in the activist's productivity produces a negative cross-sectional relation between efficiency and liquidity as the possibility of more activism exacerbates the risk of adverse selection.

Download or read book Strategic Trading Liquidity and Information Acquisition written by Haim Mendelson and published by . This book was released on 2003 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the effects of liquidity trading on the dynamics of a financial market under long-lived asymmetric information. Informed traders maximize the expected trading gains they can extract using their superior information, whereas risk-averse liquidity traders with disparate liquidity preferences maximize their expected utility. We describe a multi-period discrete time model and find the equilibrium. We then examine the continuous time analogue of the model, find the corresponding equilibrium for a single informed trader and obtain closed-form expressions and time patterns for the operating characteristics of the market. We find that liquidity traders' reaction to informed trading impedes information dissemination to the market. When information acquisition by the insider is endogenous, we find that in contrast to models with pure noise traders, it is in the insider's best interest to curtail the amount of information he acquires. Further, the acquisition of some information by the insider makes liquidity traders better off, although at zero cost the insider acquires more information than is necessary to maximize liquidity traders' welfare. For a wide range of parameter values, the informed trader chooses to voluntarily release information to the market if he is allowed to do so. Moreover, voluntary information disclosure helps solve the problem of reduced incentives for information acquisition by inducing the informed trader to acquire full information.

Download or read book Strategic Trading in Informationally Complex Environments written by Nicolas S. Lambert and published by . This book was released on 2014 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study trading behavior and the properties of prices in informationally complex markets. Our model is based on the single-period version of the linear-normal framework of Kyle (1985). We allow for essentially arbitrary correlations among the random variables involved in the model: the value of the traded asset, the signals of strategic traders and competitive market makers, and the demand from liquidity traders. We show that there always exists a unique linear equilibrium, characterize it analytically, and illustrate its properties in a series of examples. We then use this characterization to study the informational efficiency of prices as the number of strategic traders becomes large. If liquidity demand is positively correlated (or uncorrelated) with the asset value, then prices in large markets aggregate all available information. If liquidity demand is negatively correlated with the asset value, then prices in large markets aggregate all information except that contained in liquidity demand.

Download or read book Market Liquidity written by Yakov Amihud and published by Cambridge University Press. This book was released on 2013 with total page 293 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book explores the effect of liquidity on asset prices, liquidity variations over time and how liquidity risk affects prices.

Download or read book Trading and Exchanges written by Larry Harris and published by OUP USA. This book was released on 2003 with total page 664 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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).

Download or read book Forex Liquidity Trading written by Abraham Robert C and published by Independently Published. This book was released on 2024-03-12 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: What defines liquidity in forex trading? What are the most liquid times to trade in forex? Which currency pairs are the most liquid? How do major economic events influence forex liquidity? If You Are Looking For the Answers to the Questions Above, Get This Book Now!!! In this comprehensive guide, "Forex Trading Liquidity," readers will embark on a journey through the intricate world of foreign exchange trading. From understanding the fundamentals of liquidity in the forex market to mastering strategies for leveraging market conditions, this book equips both novice and experienced traders with the knowledge and tools needed to navigate the dynamic landscape of global currency markets. Through detailed explanations and real-world examples, readers will learn how liquidity impacts trading decisions, influences price movements, and shapes market dynamics. The book delves into the significance of liquidity in different currency pairs, exploring how it can affect trading volumes, bid-ask spreads, and overall market stability. This book will help you to: Understand the fundamentals of liquidity in the forex market. Learn how liquidity impacts trading decisions and price movements. Explore the significance of liquidity in different currency pairs. Discover strategies for leveraging liquidity patterns to optimize trading. Manage risk effectively in varying market conditions. Gain insights into identifying and capitalizing on liquidity opportunities. Moreover, "Forex Trading Liquidity" provides practical insights into identifying and capitalizing on liquidity patterns, managing risk effectively, and optimizing trading strategies for varying market conditions. Whether you are a beginner looking to build a strong foundation in forex trading or a seasoned trader seeking to enhance your skills, this book offers valuable insights and strategies to help you trade with confidence and success in the fast-paced world of forex. Free Video Courses This book comes with a link that grants you unique access to several forex premium video courses which will enhance your trading (FIND LINK AT THE END OF THIS BOOK.)

Download or read book TrimTabs Investing written by Charles Biderman and published by John Wiley & Sons. This book was released on 2005-04-15 with total page 209 pages. Available in PDF, EPUB and Kindle. Book excerpt: Whether you are an investment professional managing billions of dollars or an individual investor with a small nest egg, TrimTabs Investing shows you how to beat the major stock market averages with less risk. This groundbreaking book begins by comparing the stock market to a casino in which the house (public companies and the insiders who run them) buys and sells shares with the players (institutional and individual investors). TrimTabs Investing argues that stock prices are primarily a function of liquidity—the amount of shares available for purchase and the amount of money available to buy them—rather than fundamental value. Finally, it outlines the building blocks of liquidity theory and explains how you can use them to predict the direction of the stock market. “Charles Biderman, a savvy and battle-scarred veteran of the investment wars, has fashioned an intriguing approach to making money in the stock market that adroitly avoids both heavy-breathing speculation and the standard Wall Street practices that enable investors, big and small, to lose money in good markets as well as bad. Aimed at the sophisticated investor (which may or may not be an oxymoron), the book is written in blessedly straightforward prose and is a worthwhile read for anyone with an urge to have a fling at investing.--Alan Abelson Barron’s “Since the days of Joseph and Pharaoh, it has been axiomatic that the size of the grain harvest affects the level of grain prices; but today’s investors have been slow to appreciate the fact that the supply of stock shares significantly determines the level of stock prices. Biderman’s long overdue book outlines the theory and evidence behind ‘Trading Float,’ the actual—and exploitable—power behind major moves in the stock market. --Paul Montgomery CEO and CIO of Montgomery Capital Management “‘Trade as corporate execs do, not as they say.’ Charles Biderman has built an impressive list of hedge fund clients from this essential insight, and this book does a great job explaining exactly how retail investors can incorporate it into their investing.” --Eric Zitzewitz Assistant Professor of Economics, Stanford Graduate School of Business “Charles Biderman is a smart thinker, clear writer—and he offers here some very interesting ideas. This book is for the little guy who enjoys reading about money and economics, even if he doesn’t adopt the strategies offered here; and for the professional or sophisticated investor, who, to a greater or lesser degree, just might.--Andrew Tobias author of The Only Investment Guide You'll Ever Need

Download or read book Strategic Specialist and Market Liquidity written by Ariadna Dumitrescu and published by . This book was released on 2007 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: The empirical literature suggests that the limit order book contains information that might be used by the specialist for his own advantage. We develop a model of insider trading where there is a specialist who has access to the order book and informed traders who receive information about the liquidation value of the asset. The presence of a strategic specialist in the market induces non-monotonicity of market indicators with respect to the variance of liquidation value. Moreover, the existence of private information about supply significantly affects market performance as it induces, among other effects, lower market liquidity. Finally, our model suggests another link between Kyle's (1985, 1989) and Glosten and Milgrom's (1985) models by allowing for strategic behavior of the specialist.

Download or read book Myopic Or Strategic Trading written by Michael Liu and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: When faced with current and future liquidity needs, investors may behave myopically by liquidating the liquid securities, leaving the remaining portfolio vulnerable to future liquidity shocks; investors may also behave strategically by holding liquidity due to precautionary or speculative motives. Using a sample of U.S. insurers from 2001 through 2009, I directly test the theory by disentangling actuarial estimated expected liquidity need from current realized liquidity need. Empirical examination involves endogenity challenge because liquidity and trading of insurers are determined simultaneously. To address this issue, I implement the analysis in an event study (e.g. around Hurricane Katrina) framework. Controlling for regulatory constraints, insurer-level, securities-level characteristics, the analysis shows that the average insurers with large realized liquidity needs behave myopically by deleveraging the liquid securities; average insurers with large expected liquidity need behave strategically by holding and/or increasing liquid securities, and reducing illiquid securities.

Download or read book Uninformed Strategic Traders and Trading Strategies in a Specialist Market written by Barbara Rindi and published by . This book was released on 1994 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Sunshine Trading Revisited written by Barbara Rindi and published by . This book was released on 1994 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Market Liquidity written by Thierry Foucault and published by Oxford University Press. This book was released on 2023 with total page 531 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The process by which securities are traded is very different from the idealized picture of a frictionless and self-equilibrating market offered by the typical finance textbook. This book offers a more accurate and authoritative take on this process. The book starts from the assumption that not everyone is present at all times simultaneously on the market, and that participants have quite diverse information about the security's fundamentals. As a result, the order flow is a complex mix of information and noise, and a consensus price only emerges gradually over time as the trading process evolves and the participants interpret the actions of other traders. Thus, a security's actual transaction price may deviate from its fundamental value, as it would be assessed by a fully informed set of investors. The book takes these deviations seriously, and explains why and how they emerge in the trading process and are eventually eliminated. The authors draw on a vast body of theoretical insights and empirical findings on security price formation that have come to form a well-defined field within financial economics known as "market microstructure." Focusing on liquidity and price discovery, the book analyzes the tension between the two, pointing out that when price-relevant information reaches the market through trading pressure rather than through a public announcement, liquidity may suffer. It also confronts many striking phenomena in securities markets and uses the analytical tools and empirical methods of market microstructure to understand them. These include issues such as why liquidity changes over time and differs across securities, why large trades move prices up or down, and why these price changes are subsequently reversed, and why we observe temporary deviations from asset fair values"--