scholarly journals Daily abnormal price changes and trading strategies in the FOREX

2020 ◽  
Vol 48 (1) ◽  
pp. 211-222
Author(s):  
Guglielmo Maria Caporale ◽  
Alex Plastun
Keyword(s):  
Design Methodology ◽  
Abnormal Returns ◽  
Trading Strategies ◽  
Price Changes ◽  
Content Type ◽  
Cumulative Abnormal Returns ◽  
Market Inefficiency ◽  
Intraday Data ◽  
Abnormal Profits ◽  
New Evidence

PurposeThis paper explores abnormal price changes in the FOREX by using both daily and intraday data on the EURUSD, USDJPY, USDCAD, AUDUSD and EURJPY exchange rates over the period 01.01.2008–31.12.2018.Design/methodology/approachIt applies a dynamic trigger approach to detect abnormal price changes and then various statistical methods, including cumulative abnormal returns analysis, to test the following hypotheses: the intraday behaviour of hourly returns on overreaction days is different from that on normal days (H1), there are detectable patterns in intraday price dynamics on days with abnormal price changes (H2) and on the following days (H3).FindingsThe results suggest that there are statistically significant differences between intraday dynamics on days with abnormal price changes and normal days respectively; also, prices tend to change in the direction of the abnormal change during that day, but move in the opposite direction on the following day. Finally, there exist trading strategies that generate abnormal profits by exploiting the detected anomalies, which can be seen as evidence of market inefficiency.Originality/valueNew evidence on abnormal price changes and related trading strategies in the FOREX.

Currency returns during democratic transition: evidence from Tunisia

2019 ◽  
Vol 45 (7) ◽  
pp. 966-979
Author(s):  
Ghadi Saad ◽  
Taoufik Bouraoui
Keyword(s):  
Design Methodology ◽  
Democratic Transition ◽  
Abnormal Returns ◽  
Market Model ◽  
Study Analysis ◽  
Content Type ◽  
Policy Effects ◽  
Cumulative Abnormal Returns ◽  
New Evidence ◽  
The International Monetary Fund

Purpose The purpose of this paper is to investigate the question whether democratic transition elections influence currency returns. Also, the paper examines the behavior of the currency market around these elections in Tunisia. Design/methodology/approach Empirical data are collected from the International Monetary Fund, the Central Bank of Tunisia and the Tunisian stock market websites. The paper employs event study analysis using a market model and investigates abnormal currency returns around the four election events that occurred during the period of democratic transition in Tunisia (2011–2015). A robustness test is also conducted to control for monetary policy effects. Findings The results indicate that democratic transition does impact currency returns. The authors did not find any significant effect on the events dates (t0). However, event windows around the elections days reacted significantly to the events. The authors notice a significant decrease in cumulative abnormal returns (CARs) at event periods leading up to the elections. Post-event windows perceived negative CARs in the first and second election, and positive CARs in the last two elections. The authors also find that the change in the victors of the elections does not cause major differences to CARs. Further, the authors do not find significant results when controlling for inflation and interest rate. Originality/value There is no evidence yet on how democratic transition elections can affect currency returns. Given that currency is a leading indicator of the performance of the financial sector, this paper should provide policymakers with new evidence on the response of currency returns to democratic transition.

Trading against anchoring

2017 ◽  
Vol 9 (3) ◽  
pp. 242-261 ◽  
Author(s):  
Qingzhong Ma ◽  
Hui Wang ◽  
Wei Zhang
Keyword(s):  
Design Methodology ◽  
Abnormal Returns ◽  
Investor Sentiment ◽  
Trading Strategies ◽  
Market Size ◽  
Content Type ◽  
Anchoring Bias ◽  
Fama And French ◽  
Institutional Owners ◽  
Portfolio Return

Purpose The purpose of this paper is to explore trading strategies that exploit investors’ anchoring bias. Design/methodology/approach This paper forms portfolios based on nearness ratio and other anomaly variables under one- and two-way sorts. The portfolio return series are then regressed on Fama and French three factors to extract abnormal returns. Findings First is to use anchoring as a technical signal. A strategy that trades against anchoring buys stocks with prices near their 52-week high and sells stocks with prices far below their 52-week high. Based on deciles, the strategy generates a significant value-weighted monthly α of 1.13 percent, after accounting for the market, size, and value factors. Further, the strategy is profitable among both large and small stocks; the trading profit is higher among younger firms and more volatile stocks, but is similar between subsamples formed on number of analysts, level of institutional ownership, and number of institutional owners. The strategy is more profitable following periods of high investor sentiment. Second is to combine anchoring with known anomalies. For a broad set of 26 anomalies, a trading strategy that combines anchoring with the anomalies increases the value-weighted monthly α from an average of 0.61 percent to an average of 1.38 percent. While part of the profits can be attributed to momentum, momentum itself does not explain all the profits. Originality/value This paper presents empirical evidence that anchoring bias explains the profitability of a broad set of anomalies and describes practical trading strategies that exploit the anchoring bias.

Cryptocurrency bubble risk and the FOMC announcements during COVID-19 black swan event

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anis Jarboui ◽  
Emna Mnif
Keyword(s):  
Federal Reserve ◽  
Abnormal Returns ◽  
Relevant Information ◽  
Future Research ◽  
Open Market ◽  
Predictive Capacity ◽  
Federal Open Market Committee ◽  
Content Type ◽  
Cumulative Abnormal Returns ◽  
Practical Implications

Purpose After the COVID-19 outbreak, the Federal Reserve has undertaken several monetary policies to alleviate the pandemic consequences on the markets. This paper aims to evaluate the effects of the Federal Reserve monetary policy on the cryptocurrency dynamics during the COVID19 pandemic. Design/methodology/approach We examine the response and feedback effects via an event study methodology. For this purpose, abnormal returns (AR) and cumulative abnormal returns (CARs) around the first FOMC (Federal Open Market Committee) announcement related to the COVID-19 pandemic for the top five cryptocurrencies are explored. We, further investigate the effect of the eight FOMC statement announcements during the COVID19 pandemic on these cryptocurrencies (Bitcoin, Ethereum, Tether, Litecoin, and Ripple). In the above-mentioned crypto-currency markets, we investigate the presence of bubbles by using the PSY test. We then examine the concordance of the dates of these bubbles with the dates of the FOMC announcements. Findings The empirical results show that the first FOMC event has a negative significant effect after 4 days of the announcement date for all studied cryptocurrencies except Tether. The results also indicate that cumulative abnormal returns are significant during the event windows of (−3,8), (−3,9), and (−3,10). Besides, we find that Bitcoin, Ethereum and, Litecoin lived short bubbles lasting for a few days. However, Ripple and Tether markets present no bubbles and no explosive periods. Research limitations/implications This paper presents trained proof that FOMC announcements have a positive effect on volatility's predictive capacity. This work therefore promotes the study of the data quality of volatility in future research as well. Practical implications The justified effect of the FOMC announcements on cryptocurrency as a speculative asset has practical implications for investors in building their trading strategies in anticipation of the next FOMC announcement. Therefore, this study implies that the FOMC announcements contain very relevant information for investors in the cryptocurrency market. This research may not only encourage a better understanding of the evolution of the expectations of policymakers, but also facilitate a better understanding of how these expectations are developed. Originality/value The COVID-19 pandemic has disturbed the stability of financial markets, inciting the Fed to take some monetary regulations. To the best of our knowledge, this study is the first one that analyses the response of five major cryptocurrencies to FOMC announcements during COVID 19 pandemic and associates these dates with bubble occurrences.

The effect of the imposition of a public reprimand on the stock price of companies in Malaysia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Emie Famieza Zainudin ◽  
Hafiza Aishah Hashim ◽  
Shahnaz Ismail
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Design Methodology ◽  
Negative Impact ◽  
Abnormal Returns ◽  
Investment Decisions ◽  
Market Model ◽  
Market Reactions ◽  
Content Type ◽  
A Company

Purpose This paper aims to examine the effect of the imposition of public reprimands on the underlying stock prices of companies in Malaysia. Design/methodology/approach Data on 148 companies that received public reprimands during the period from 2007 to 2013 were collected from the Bursa Malaysia website to analyse the market reactions to the imposition of public reprimands. Findings Based on a market model of abnormal returns, the empirical result showed that the imposition of a public reprimand had a negative impact on a company’s stock price. Moreover, when a market model of average abnormal returns (AAR) was used, the result indicated that companies that had received a public reprimand had a negative AAR value. Research limitations/implications The findings from this study have implications for shareholders in making their investment decisions because they can switch their investments to other companies and markets after a company in which they are interested or have made an investment has received a public reprimand. Originality/value There is limited research on the imposition of public reprimands and the effect that it has on companies in developing countries. Hence, this study contributes to research in this area by providing evidence on the effect of public reprimand on stock price reactions in the context of a developing country, namely, Malaysia.

New CEOs’ previous experience and acquisition performance

2019 ◽  
Vol 27 (3) ◽  
pp. 745-758 ◽  
Author(s):  
Heejin Woo
Keyword(s):  
Abnormal Returns ◽  
Competitive Advantages ◽  
Upper Echelon ◽  
Acquisition Performance ◽  
Content Type ◽  
Corporate Strategies ◽  
Cumulative Abnormal Returns ◽  
The Us ◽  
Event Study Method ◽  
Industry Experience

Purpose This study aims to investigate how new CEOs’ previous experiences in other organizations and other industries create value in acquisitions. Drawing on the upper echelon perspective, this study theorizes that the multiorganizational experience of new CEOs is positively associated with acquisition performance and, in particular, that the multi-industry experience of new CEOs leads to better performance in diversifying acquisitions than in related acquisitions. While new CEOs without multiorganizational experience undergo a cognitive entrenchment in firm-specific experience, new CEOs with multiorganizational experience can lead acquisitions with more flexibility and agility. Design/methodology/approach Acquisition and organizational data were drawn from the US manufacturing industries (SIC 20-39) between 2008 and 2010. The event study method was used to test hypotheses. In 346 acquisitions made by 139 firms, acquisition performance was measured according to cumulative abnormal returns. Findings Consistent with the hypotheses, the multiorganizational experience of new CEOs was positively associated with acquisition performance and, in particular, the multi-industry experience of new CEOs led to better performance in diversifying acquisitions than in related acquisitions. Originality/value This paper contributes to the CEO literature and acquisition literature by suggesting that the multiorganizational experience of new CEOs can be a valuable source of competitive advantages, particularly when implementing corporate strategies involving interorganizational integration processes.

Effect of pre-disclosure information leakage by block traders

2019 ◽  
Vol 20 (5) ◽  
pp. 470-483
Author(s):  
Tai-Young Kim
Keyword(s):  
Moral Hazard ◽  
Design Methodology ◽  
Abnormal Returns ◽  
Information Leakage ◽  
Market Reactions ◽  
Content Type

Purpose This paper aims to investigate pre-disclosure information leakage by block traders and market reactions to disclosures of off-hours block trading compared to off-market trading. Design/methodology/approach Stock responses were analyzed based on timely disclosures regarding Korean firms’ decisions to dispose of their own shares to improve their financial structures. Findings The results showed that pre-disclosure abnormal returns were generated in off-hours block trading. In contrast, on disclosure days, the returns for off-hours block trading were significantly lower than those for off-market trading. It was consistent with prior studies, indicating that block traders were related to information leakage and caused moral hazard problems. Originality/value The comparison between off-hours block trading and off-market trading provides important insights regarding block traders’ behavior. This study’s findings on the leakage of information from block traders indicate the need for firms to exercise caution when using block traders.

scholarly journals Price overreactions in the cryptocurrency market

2019 ◽  
Vol 46 (5) ◽  
pp. 1137-1155 ◽  
Author(s):  
Guglielmo Maria Caporale ◽  
Alex Plastun
Keyword(s):  
Regression Analysis ◽  
Transaction Costs ◽  
Design Methodology ◽  
Efficient Market Hypothesis ◽  
Efficient Market ◽  
Price Changes ◽  
Content Type ◽  
Dummy Variables ◽  
Price Patterns ◽  
Non Parametric

Purpose The purpose of this paper is to examine price overreactions in the case of the following cryptocurrencies: bitcoin, litecoin, ripple and dash. Design/methodology/approach A number of parametric (t-test, ANOVA, regression analysis with dummy variables) and non-parametric (Mann–Whitney U-test) tests confirm the presence of price patterns after overreactions: the next day price changes in both directions are bigger than after “normal” days. A trading robot approach is then used to establish whether these statistical anomalies can be exploited to generate profits. Findings The results suggest that a strategy based on counter-movements after overreactions is not profitable, whilst one based on inertia appears to be profitable but produces outcomes not statistically different from the random ones. Therefore, the overreactions detected in the cryptocurrency market do not give rise to exploitable profit opportunities (possibly because of transaction costs) and cannot be seen as evidence against the efficient market hypothesis (EMH). Originality/value The overreactions detected in the cryptocurrency market do not give rise to exploitable profit opportunities (possibly because of transaction costs) and cannot be seen as evidence against the EMH.

FINRA proposes requiring registration of associated persons who develop algorithmic trading strategies

2015 ◽  
Vol 16 (3) ◽  
pp. 33-36
Author(s):  
Janet M. Angstadt ◽  
Michael T. Foley ◽  
Ross Pazzol ◽  
James D. Van De Graaff
Keyword(s):  
Design Methodology ◽  
Trading Strategy ◽  
Trading Strategies ◽  
Algorithmic Trading ◽  
Design Development ◽  
Significant Modification ◽  
Current Form ◽  
Content Type ◽  
Rule Making

Purpose – To analyze FINRA’s proposal that would require registration with FINRA of associated persons of FINRA-member firms who are primarily responsible for the design, development or significant modification of an algorithmic trading strategy. Design/methodology/approach – This article discusses the rationale and details of the proposed requirements. Findings – If adopted in its current form, the proposed rule-making, particularly when combined with the SEC’s proposed amendments to Rule 15b9-1 under the Securities and Exchange Act, would result in many various individuals who currently are not subject to a FINRA registration requirement, to pass a qualification examination and register. Originality/value – This article contains valuable information about important FINRA rule making activity.

Female entrepreneurship and growth in Cameroon

2015 ◽  
Vol 6 (1) ◽  
pp. 107-119 ◽  
Author(s):  
Françoise Okah-Efogo ◽  
Gaëlle Tatiana Timba
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Statistical Analysis ◽  
Design Methodology ◽  
Female Entrepreneurship ◽  
Content Type ◽  
Theoretical Assumptions ◽  
New Evidence ◽  
The Relationship ◽  
Simple Statistical Analysis

Purpose – The purpose of this paper is to supplement the literature on the effect of female entrepreneurship on economic growth by bringing new evidence for the case of SMEs owned by women in Cameroon. Design/methodology/approach – Effects of female entrepreneurship on Cameroonian economic growth are analyzed through a simple statistical analysis. Findings – Our results reveal that there is a growing female entrepreneurship in Cameroon, localized in many different sectors of activity. Moreover, these SMEs are opportunity entrepreneurship which contributes to economic growth by considerably reducing unemployment particularly for women, generating revenues for government and enhancing human capital skills. Research limitations/implications – The study suggests an investment in SMEs owned by women and an investment in education and skills of those women in order to positively affect economic growth. Originality/value – Many studies have focussed their attention on the relationship between SMEs and economic growth, but few attempted to evaluate the theoretical assumptions in case studies and in a gender perspective.

scholarly journals The CAC 40 Index’s Reaction to Terrorist Attacks: The Case of Charlie Hebdo

2019 ◽  
Vol 14 (2) ◽  
pp. 55-72
Author(s):  
Khoury Rim El
Keyword(s):  
Terrorist Attack ◽  
Abnormal Returns ◽  
Economic Consequences ◽  
Terrorist Attacks ◽  
Cumulative Abnormal Returns ◽  
Study Methodology ◽  
Available Information ◽  
Abnormal Profits ◽  
Event Study Methodology ◽  
Charlie Hebdo

Abstract Over the last decades, terrorism has become a global phenomenon to which every society is exposed from time to time. Terrorist attacks can have many economic consequences that may affect a number of sectors, including the capital market. The main goal of this paper is to examine the reaction of the CAC40 index to one terrorist attack, mainly “Charlie Hebdo” using an event study methodology. By calculating the abnormal returns and the cumulative abnormal returns in the event period, the results obtained show no significant abnormal returns on the day of the terrorist attack suggesting that the market had directly absorbed the effect of the attack. Thus, the findings suggest that the French market is semi-strong efficient. Investors can rely neither on past information nor on publicly available information to make abnormal profits.

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