Traders and time: who moves the market?

2015 ◽  
Vol 32 (1) ◽  
pp. 74-97 ◽  
Author(s):  
Fabrizio Ferriani
Keyword(s):  
High Frequency ◽  
Dominant Role ◽  
Market Liquidity ◽  
Content Type ◽  
Market Activity ◽  
Information Models ◽  
Informed Traders ◽  
Transaction Level ◽  
Instantaneous Volatility ◽  
The Impact

Purpose – This paper is aimed to investigate the impact of different categories of traders on price and volume durations at Euronext Paris. The two series are respectively related to the instantaneous volatility and the market liquidity; hence, they are particularly suited to test microstructure hypotheses. Design/methodology/approach – A Log-autoregressive conditional duration model was adopted to include the information on the traders’ identity at the transaction level. High-frequency data were used and how the informed traders and the liquidity provider affect the arrival of market events was studied. The robustness of our results was also checked by testing different distributions and controlling for microstructure effects. Findings – It was found that informed traders and the liquidity provider exert a dominant role in accelerating the market activity. This result depends on the state of the market, i.e. it is effective only during periods of high frequency of transactions. The estimates for price durations show that a high instantaneous volatility can be mainly ascribed to a great concentration of informed traders. Informed traders are also found to shorten volume durations by clustering small-size orders to disguise their private signal. For both durations, the liquidity provider is also found to foster the market activity, likely because of his contractual duties. Originality/value – The article is of interest for researchers in the field of market microstructure, as well as for specialists in the high-frequency trading. Results provide an empirical confirmation of information models which theorize an accelerating effect for informed trading. To the best of the authors’ knowledge, this is the first contribution to study the impact of traders’categories at the transaction level and with different definitions of durations.

Ownership concentration, earnings management and stock market liquidity: evidence from Malaysia

2017 ◽  
Vol 17 (3) ◽  
pp. 490-510 ◽  
Author(s):  
Hamdan Amer Al-Jaifi
Keyword(s):  
Stock Market ◽  
Earnings Management ◽  
Instrumental Variables ◽  
Generalized Method Of Moments ◽  
Market Liquidity ◽  
Ownership Concentration ◽  
Estimation Methods ◽  
Content Type ◽  
Stock Market Liquidity ◽  
The Impact

Purpose This paper aims to examine whether ownership concentration and earnings management affect the stock market liquidity of Malaysian firms. Design/methodology/approach This study uses a sample of 2,020 yearly firm observations in Bursa Malaysia over the period 2009-2012. The ordinary least square regression is used to examine the relationships. The study undertakes a sensitivity test by regressing the main study variables by using different measurements. Another robustness test is then used, where a regression based on the change in variables and a one-year lag of the independent variables are used. Furthermore, to alleviate the concern of possible endogeneity, the simultaneity and reverse causality are checked using the lag of the dependent variable, fixed effect regression, two-stage least squares using the instrumental variables and the generalized method of moments using instrumental variables analysis. Findings The study finds that firms with a high level of ownership concentration have discrepancies in information between informed and uninformed traders, which impair the stock market liquidity. In addition, this study finds that firms with high earnings management experience greater liquidity. A possible explanation for this is that firms might manage earnings to convey private information to enhance the information content of the earnings. Overall, the evidence suggests that manipulating earnings signals information informatively, particularly in a country with a higher level of ownership concentration and a higher likelihood of expropriating minority shareholders. Originality/value This study enriches the limited empirical research devoted to the impact of earnings management and ownership concentration on stock market liquidity especially in the context of emerging economies. The findings of this study are robust to alternative liquidity measurements, to alternative estimation methods, and to endogeneity bias.

Does gender diversity on boards reduce information asymmetry problems? Empirical evidence from the French market

2019 ◽  
Vol 10 (2) ◽  
pp. 144-166
Author(s):  
Nadia Loukil ◽  
Ouidad Yousfi ◽  
Raissa Wend-kuuni Yerbanga
Keyword(s):  
Asymmetric Information ◽  
Stock Market ◽  
Gender Diversity ◽  
Market Liquidity ◽  
Idiosyncratic Volatility ◽  
Independent Directors ◽  
Corporate Boards ◽  
Content Type ◽  
Bid Ask Spread ◽  
The Impact

Purpose The purpose of this paper is to investigate the effect of female members in boards of directors on asymmetric information in the French stock market. Design/methodology/approach The authors use two proxies for asymmetric information: the idiosyncratic volatility and the bid-ask spread. This study is conducted on all listed firms in the SBF 120 index between 2002 and 2012. Findings Results show that gender diversity in boardrooms has a negative effect on the level of private information in stock markets and reduces the bid-ask spread. However, these effects are significant in family-controlled firms: female inside directors significantly increase the idiosyncratic volatility and the bid-ask spread, while female independent directors decrease both proxies for stock market liquidity. Research limitations/implications Our empirical findings contribute to the current debate on the benefits of gender diversity on corporate boards from the market perspective. It shows that, under specific conditions, financial markets could be receptive to the presence of female directors in boardrooms. Practical implications Practitioners and policymakers advocate the benefits of gender diversity on corporate boards. This paper shows that when the protection of minority shareholders is poor, the stock market is receptive to the presence of women independent directors, only in family controlled firms. This is a further argument that could help women to overcome glass-ceiling barriers they usually face to achieve top management positions. Originality/value This paper provides support for the increased attention paid to gender-diverse boards. It addresses the market sensitivity toward the presence of women members in French boardrooms and their positions. This is the first paper, to the best of our knowledge, to address how appointing women to different positions in the boardroom could provide signals to investors in the presence of asymmetric information. French firms are mostly family controlled. Thus, the findings bring valuable information of the impact of board diversity on the stock market considering family and nonfamily firms.

scholarly journals Liquidity in global real estate securities markets

2016 ◽  
Vol 34 (4) ◽  
pp. 321-346 ◽  
Author(s):  
Nicole Lux ◽  
Alex Moss
Keyword(s):  
Real Estate ◽  
Stock Market ◽  
Market Liquidity ◽  
Company Size ◽  
Small Companies ◽  
Stock Performance ◽  
Content Type ◽  
The Usa ◽  
Market Capitalisation ◽  
The Impact

Purpose – The purpose of this paper is to test the relationship between liquidity in listed real estate markets, company size and geography during different market cycles, specifically pre-crisis (2002-2006) and post-crisis (2010-2014). Further, the study analyses the impact of stock liquidity on stock performance. In a previous study the authors examined the impact of liquidity on the valuation of European real estate shares. The result showed that there is a strong relationship between liquidity, valuation and market capitalisation post the Global Financial Crisis. Design/methodology/approach – The paper studies the linkages between regional market liquidity and company size for 60 listed real estate companies globally and determines the key drivers of company stock market liquidity pre- and post-crisis as well as the impact on stock performance. Analysis of variance is used to test cross-sectional independence in market liquidity combined with the Tukey’s post hoc test. The selected test indicators of liquidity to capture market depth and market tightness are daily stock turnover as percentage of market capitalisation and daily bid-ask spreads. Findings – Findings confirm previous studies that market liquidity factors are correlated globally over time indicating markets interdependence. However, sample groups by company size and geography form independent samples with different sample means, thus specific liquidity levels in each market may be different. First, stock turnover levels have not recovered post-crisis to pre-crisis levels in the majority of markets while spreads have continued moving downward to nearly insignificant levels in line with the rest of the equity market. Second, with regards to stock performance, the European bias previously detected is not apparent in the USA, and there is no evidence of the small cap vs large cap effect of small companies achieving superior returns, although smaller companies have outperformed in Europe and Asia in each of the last three years (2012-2014). Practical implications – The key implication is that although spread levels for smaller companies are higher, implying a slight risk premium when investing in small companies, this did not manifest into consistent superior stock market returns in the periods studied. In a mature market such as the USA or UK, liquidity levels in terms of stock turnover are higher and spreads are lower thus reducing trading costs, making them more attractive for investors. Originality/value – This research brings together previous analysis on stock market liquidity and stock performance on a global market level. It further tests the dependence of market liquidity on two key indicators, namely, geography and company size and analyses market changes with respect to liquidity pre- and post-crisis.

scholarly journals Stock market liquidity, the great lockdown and the COVID-19 global pandemic nexus in MENA countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anas Alaoui Mdaghri ◽  
Abdessamad Raghibi ◽  
Cuong Nguyen Thanh ◽  
Lahsen Oubdi
Keyword(s):  
Stock Market ◽  
Negative Impact ◽  
Market Liquidity ◽  
Mena Region ◽  
Stock Market Returns ◽  
Content Type ◽  
Mena Countries ◽  
Global Pandemic ◽  
Stock Market Liquidity ◽  
The Impact

PurposeThe purpose of this paper is to investigate the impact of the global coronavirus (COVID-19) pandemic on stock market liquidity, while taking into account the depth and tightness dimensions.Design/methodology/approachThe author used a panel data regression on stock market dataset, representing 314 listed firms operating in six Middle East and North African (MENA) countries from February to May 2020.FindingsThe regression results on the overall sample indicate that the liquidity related to the depth measure was positively correlated with the growth in the confirmed number of cases and deaths and stringency index. Moreover, the market depth was positively related to the confirmed cases of COVID-19. The results also indicate that the liquidity of small cap and big cap firms was significantly impacted by the confirmed number of cases, while the stringency index is only significant for the liquidity depth measure. Moreover, the results regarding sectors and country level analysis confirmed that COVID-19 had a significant and negative impact of stock market liquidity.Research limitations/implicationsThis paper confirms that the global coronavirus pandemic has decreased the stock market liquidity in terms of both the depth and the tightness dimensions.Originality/valueWhile most empirical papers focused on the impact of the COVID-19 global pandemic on stock market returns, this paper investigated liquidity chock at firm level in the MENA region using both tightness and depth dimensions.

scholarly journals Momentum investment strategies, corporate governance and firm performance: an analysis of Islamic banks

2017 ◽  
Vol 17 (2) ◽  
pp. 192-211 ◽  
Author(s):  
Tasawar Nawaz
Keyword(s):  
Corporate Governance ◽  
Human Capital ◽  
Positive Impact ◽  
Dominant Role ◽  
Market Value ◽  
Investment Strategies ◽  
Islamic Banks ◽  
Data Set ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to empirically examine the effect of investments in organisational resources and corporate governance features on market-based performance of Islamic banks (IBs). Design/methodology/approach The required data to calculate different constituents of banks’ investment strategies and governance mechanism were hand collected from 268 annual reports. Different regression models were used to determine the impact of investment in human and structural capital and corporate governance features on market performance of IBs. Findings The paper finds that investments in knowledge resources (human capital, in particular) have a significantly positive impact on the market value of IBs. The results further reveal that IBs’ strategy to rely on long-term human capital accumulation can be seen as idiosyncratic problem-solving knowledge capital. Based on market measure, the paper finds role duality to have a significant positive impact and the size of the advisory board to have the opposite effect on market value. Research limitations/implications This study includes IBs only and ignores other Islamic financial services providers such as Takaful (insurance) companies. The study leaves this chasm to be filled by future researchers. Practical implications The findings may serve as a useful input for both Islamic bankers and regulators to apply knowledge management in their institutions. Furthermore, the dominant role of human capital also provides insight to managers with respect to business performance levers. Originality/value The main contribution of this paper is to provide insight into the Islamic banking business model using a unique hand-collected data set, to identify the effect of investments in organisational resources and bank governance on market value in before, during and after financial crisis.

scholarly journals Determinants and impacts of risk disclosure quality: evidence from China

2018 ◽  
Vol 19 (4) ◽  
pp. 518-536 ◽  
Author(s):  
Tamer Elshandidy ◽  
Lorenzo Neri ◽  
Yingxi Guo
Keyword(s):  
Content Analysis ◽  
Ordinary Least Squares ◽  
Market Liquidity ◽  
Risk Disclosure ◽  
Disclosure Quality ◽  
Content Type ◽  
Financial Firms ◽  
The Impact ◽  
Risk Reporting

PurposeFew studies have focused on emerging markets owing to difficulties in identifying the real effect of disclosures on these economies. To fill this gap, the purpose of this paper is to first: investigate the main drivers for risk disclosure quality for Chinese financial firms, second: further study the impact of such disclosure on market liquidity.Design/methodology/approachThe sample comprises all financial firms listed in the Shanghai A-shares market for the period 2013–2015. By relying on manual content analysis of annual reports, the risk disclosure quality is measured through a multidimensional approach which encompasses three factors: quantity of disclosure, coverage of disclosure and the semantic properties of depth and outlook. The findings of this paper are based on ordinary least squares and fixed-effects estimations.FindingsThe findings suggest that firm characteristics (especially size) influence risk disclosure practices of Chinese financial companies. Furthermore, the authors found that risk disclosure quality has an impact on market liquidity, and when the authors analysed each year the authors noticed that the results were driven by the year 2013; moreover, the authors noticed no or little significance from the period of the emerging financial crisis.Research limitations/implicationsThe sample of this paper is limited to financial firms in China. The usage of manual content analysis limits the authors’ ability to investigate risk reporting drivers and its impact on market liquidity on a large scale.Practical implicationsThe importance of this paper stems from documenting several reporting incentives concerning not only firms’ quantity, but also firms’ quality of risk reporting. Collectively, the findings support activism for reforms and the enhancement of regulations in China in order to make the market more efficient.Originality/valueThis paper provides new evidence for financial companies in China on the principal drivers for risk disclosure quality and highlights how the quality of such disclosure impacts market liquidity. Furthermore, this paper confirms previous findings on the Chinese market (Ball et al., 2000; Zou and Adams, 2008) in which, given a decreasing but still strong state presence, there is higher stock volatility and weak corporate governance.

Effects of MILA on their stock markets: an empirical analysis on market activity and dynamic correlations

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jorge Andrés Muñoz Mendoza ◽  
Sandra María Sepúlveda Yelpo ◽  
Carmen Lissette Velosos Ramos ◽  
Carlos Leandro Delgado Fuentealba
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Markets ◽  
Regime Switching ◽  
Series Data ◽  
Integration Process ◽  
Content Type ◽  
Market Activity ◽  
Dynamic Correlations ◽  
The Impact

PurposeThe purpose of this article is to analyze the effects of the integration process for the Integrated Market of Latin America (MILA) on its stock markets behavior as well as their degree of integration.Design/methodology/approachDaily time series data were used for stock returns, volatility, volume and the number of transactions and securities between August 16, 2007 and December 28, 2018. A DCC-MGARCH model was applied to analyze the impact of MILA on stock market behavior and predict dynamic correlations. A GARCH (1,1) model was used to determine the effect of MILA on co-movements between markets. Finally, a Markov regime switching model was used for robustness analysis.FindingsMILA increased stock market activity in terms of volume, transactions and securities traded. However, it reduced returns and volatility. MILA had significant effects on the dynamic correlations between regional stock markets. After the integration process, the dynamic correlations of returns and volatility were reduced, but those related to volume, transactions and securities traded increased. Mexico's subsequent entry into MILA further reduced market volatility, but it did not have relevant effects on markets' co-movements.Originality/valueThese results are relevant for investors and policymakers. MILA has benefited the markets by promoting stock market activity, reducing risk, creating a margin for diversification and limiting risk contagion between them. These results help to guide investment decisions due to the fact that MILA's benefits in terms of regional diversification would be greater in some markets.

scholarly journals Leadership and performance in intermunicipal networks

2020 ◽  
Vol 32 (2) ◽  
pp. 177-196
Author(s):  
Denita Cepiku ◽  
Marco Mastrodascio
Keyword(s):  
Local Government ◽  
High Frequency ◽  
High Performance ◽  
Network Performance ◽  
Leadership Behaviors ◽  
Content Type ◽  
Specific Category ◽  
And Performance ◽  
Integrative Leadership ◽  
The Impact

PurposeThe purpose of this research is to highlight the impact of integrative leadership behaviors on network performance in local government networks.Design/methodology/approachThe data were retrieved from a survey conducted on 362 local government network leaders in Italy. Their leadership behaviors were compared with the level of network performance anonymously self-reported.FindingsThe findings show that high frequency in the usage of a specific category of behavior does not always lead to high performance in local government networks. Moreover, leadership behaviors leading to highly performing networks are not always engaged most frequently by networks' leaders.Originality/valueThis research gives an empirical contribution to a neglected topic: network leadership. Moreover, the authors attempt to highlight how it is able to influence network performance.

Impact of regulatory changes on government bond market liquidity

2017 ◽  
Vol 25 (3) ◽  
pp. 307-317 ◽  
Author(s):  
Hans Blommestein
Keyword(s):  
Market Liquidity ◽  
Adverse Impact ◽  
Bond Markets ◽  
Government Bond ◽  
Content Type ◽  
Market Participants ◽  
Regulatory Changes ◽  
Survey Results ◽  
Government Bond Markets ◽  
The Impact

Purpose The purpose of this study is to assess the seriousness of the impact of new regulatory factors on liquidity in government bond markets since the onset of the global financial crisis. Design/methodology/approach Questionnaires were circulated for examining the adverse impact of regulatory changes on liquidity. New evidence was presented about the adverse impact of the process of regulatory changes on market liquidity. Findings The paper presents new survey results on the adverse liquidity impact of regulations on market liquidity. Responses show that government issuers differ in their assessment on the severity of the impact of the various regulations. Determining this longer-term impact is quite complex because measures of liquidity may not only reflect the impact of regulatory changes, but also the responses by policymakers and market participants (to these regulatory changes), covering in particular the following: market transparency, trading practices, market infrastructure and other policies to promote liquidity, including by reducing unconventional monetary policy measures. Also, market dynamics may have become more complex due to responses by market participants. Practical implications Debt managers need to take into account regulations with a significant adverse influence on both market liquidity and the price discovery process. As liquidity in government bond markets also has a direct impact on funding possibilities and financing costs, funding liquidity may also be affected, especially during periods with market stress. This means that the funding strategy may need to be adapted. Originality/value The paper presents new survey results on the impact of new regulations on market liquidity. This assessment is quite complex because measures of longer-term liquidity may reflect the impact of regulatory changes and the responses by policymakers and market participants to these changes.

Determinants of tracking error in German ETFs – the role of market liquidity

2016 ◽  
Vol 42 (5) ◽  
pp. 417-437 ◽  
Author(s):  
Friedrich Osterhoff ◽  
Christoph Kaserer
Keyword(s):  
Fixed Effects ◽  
Tracking Error ◽  
Market Liquidity ◽  
Special Focus ◽  
Exchange Traded Funds ◽  
Content Type ◽  
Tracking Ability ◽  
Liquidity Cost ◽  
Underlying Stocks ◽  
The Impact

Purpose – The purpose of this paper is to contribute to a better understanding of the impact of market liquidity on the daily tracking error of exchange-traded funds (ETFs). It puts a special focus on the liquidity cost of individual underlying stocks as well as the process of creation/redemption of ETF shares as key determinants of tracking ability. Design/methodology/approach – The study is based on daily observations of fund data for eight fully replicating German equity ETFs for July 2001-October 2013. A regression model with fund fixed effects is chosen to determine the effect of liquidity cost, creation/redemption and other control variables on daily tracking error. Data were compiled from issuer websites and Datastream. Proprietary XETRA Liquidity Measure, which was used as proxy for liquidity cost was supplied by Deutsche Börse. Findings – The study finds daily tracking error to significantly depend on the liquidity of underlying stocks. This finding emerges even though the ETFs in this study predominantly use in-kind creation/redemption. Even after controlling for creation/redemption, the liquidity impact remains basically unchanged. One reason might be imperfect replication of index weights: Either the in-kind-basket delivered in the course of creation/redemption does not perfectly match the benchmark-weights or the internal rebalancing of weights causes liquidity cost. Originality/value – To the best of the authors’ knowledge, this is the first paper that uses a specific liquidity measure for each single stock underlying an ETF. The findings extend the literature by corroborating the view that liquidity of individual stocks in the underlying portfolio has an impact on tracking error.

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