| 1. |
- Menkveld, Albert J., et al.
(författare)
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Nonstandard Errors
- 2024
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Ingår i: JOURNAL OF FINANCE. - : Wiley-Blackwell. - 0022-1082 .- 1540-6261. ; 79:3, s. 2339-2390
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Tidskriftsartikel (refereegranskat)abstract
- In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty-nonstandard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for more reproducible or higher rated research. Adding peer-review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants.
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| 2. |
- Ding, Mingfa, et al.
(författare)
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Large-caps liquidity provision, market liquidity and high-frequency market makers’ trading behaviour
- 2022
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Ingår i: European Journal of Finance. - : Informa UK Limited. - 1351-847X .- 1466-4364. ; 28:16, s. 1621-1641
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Tidskriftsartikel (refereegranskat)abstract
- This paper exploits the introduction of the liquidity provision scheme (LPS) in NASDAQ Stockholm (NOMX) to assess how the implementation of LPS affects market liquidity and the trading behaviors of high-frequency market makers. Unlike the traditional designated market makers (DMM) that target the liquidity supply of small and less traded stocks, LPS is implemented for large-caps and liquid stocks. LPS requires participants to submit buy and sell orders at the European best bid and offer quotes with a size larger than 50,000 Swedish Krona on each trade side. LPS delivers liquidity improvements by reducing order processing costs in the large-cap and cross-listed stocks in the NOMX and Chi-X markets, with no evidence of market liquidity migration from Chi-X to NOMX. As market makers registered with LPS are likely high-frequency traders, LPS stabilizes market liquidity as market makers’ decisions to supply or demand liquidity become less sensitive to market conditions like the spread and order imbalance.
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| 3. |
- Frino, Alex, et al.
(författare)
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Are option traders more informed than Twitter users? A PVAR analysis
- 2022
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Ingår i: Journal of futures markets. - : Wiley. - 0270-7314 .- 1096-9934. ; 42:9, s. 1755-1771
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Tidskriftsartikel (refereegranskat)abstract
- Prior research has examined whether Twitter information predicts stock returns and volatility. We study the causality between Twitter information, stock‐realized volatility, and option‐implied volatility using a panel vector autoregressive model. Using panel data on S&P/ASX 200 stocks, we reveal a bidirectional causalitybetween realized volatility and Twitter activity and divergence of opinion. We alsofind strong evidence of causality from implied idiosyncratic volatility to Twitter activity, sentiment, and divergence of opinion. Our results highlight the role of theoptions market in predicting Twitter information and monitoring social mediaflows to prevent the spread of fake news.
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| 4. |
- Hasselgren, Anton, et al.
(författare)
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Do oil price forecast disagreement of survey of professional forecasters predict crude oil return volatility?
- 2024
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Ingår i: International Journal of Forecasting. - 0169-2070 .- 1872-8200.
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Tidskriftsartikel (refereegranskat)abstract
- This paper explores whether the dispersion in forecasted crude oil prices from the European Central Bank Survey of Professional Forecasters can provide insights for predicting crude oil return volatility. It is well-documented that higher disagreement among forecasters of asset price implies greater uncertainty and higher return volatility. Using several Generalized Autoregressive Conditional Heteroskedasticity with Mixed Data Sampling (GARCH-MIDAS) models, we find, based on the in-sample estimation results, the oil market experiences greater volatility when the forecasters’ disagreements increase. The model that integrates both historical realized variance and forward-looking forecaster disagreement into the conditional variance, along with the model focusing solely on pure forward-looking forecaster disagreement, exhibits a much superior fit to the data compared to the model relying solely on realized variance and the models considering forward-looking forecasted mean return. The out-of-sample forecasting results unequivocally illustrate that incorporating forecaster disagreement offers valuable insights, markedly enhancing the predictive accuracy of crude oil return volatility within the GARCH-MIDAS model. Moreover, we illustrate the economic benefit of considering forecasters’ disagreement when forecasting volatility, demonstrating its significance for VaR risk management.
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| 5. |
- Hou, Ai Jun, et al.
(författare)
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Futures trading costs and market microstructure invariance : Identifying bet activity
- 2024
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Ingår i: Journal of futures markets. - 0270-7314 .- 1096-9934. ; 44:6, s. 901-922
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Tidskriftsartikel (refereegranskat)abstract
- Market microstructure invariance (MMI) stipulates that trading costs of financial assets are driven by the volume and volatility of bets, but these variables are inherently difficult to identify. With futures transactions data, we estimate bet volume as the trading volume of brokerage firms that trade on behalf of their clients and bet volatility as the trade-related component of futures volatility. We find that the futures bid–ask spread lines up with bet volume and bet volatility as predicted by MMI, and that intermediation by high-frequency traders does not interfere with the MMI relation.
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| 6. |
- Hou, Ai Jun, et al.
(författare)
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Spillover effects of monetary policy and information shocks
- 2024
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Ingår i: Finance Research Letters. - 1544-6123 .- 1544-6131. ; 62
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Tidskriftsartikel (refereegranskat)abstract
- Central bank announcements convey monetary policy actions and the bank’s assessment of the economic outlook. By analyzing the monetary and information shocks from the Federal Reserve (Fed) and the European Central Bank (ECB), we find that the information shocks from the ECB and Fed, in addition to the monetary policy shocks from both central banks, contribute to the comovement of interest rates in many countries. Our findings underscore the role played by business cycle comovements, foreign exchange dynamics, and financial openness as transmission channels for monetary policy shocks and information shocks.
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| 7. |
- Suardi, Sandy, et al.
(författare)
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COVID-19 Pandemic and Liquidity Commonality
- 2022
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Ingår i: Journal of international financial markets, institutions, and money. - : Elsevier BV. - 1042-4431 .- 1873-0612. ; 78
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Tidskriftsartikel (refereegranskat)abstract
- This paper shows how the US, UK, Germany and China are financially connected through their stock market liquidity in the COVID-19 pandemic. Using high frequency data on transaction costs, we identify a decrease in stock market liquidity and an increase in liquidity commonality amongst these countries after the World Health Organisation (WHO) declared the global pandemic. Furthermore, there is increased transmission of liquidity shocks from the country with higher COVID new cases and COVID-related death cases, indicating that markets are more connected with increased outbreak severity. Our results suggest that COVID-19 intensifies liquidity risk and worsens the vulnerability of individual stock market's liquidity to aggregate liquidity shocks in financial markets.
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