Informed Trading, Predictable Noise Trading Activities and Market Manipulation

2009 ◽  
Author(s):  
Jungsuk Han
Keyword(s):  
Informed Trading ◽  
Market Manipulation ◽  
Noise Trading ◽  
Trading Activities

The Price of Street Friends: Social Networks, Informed Trading, and Shareholder Costs

2016 ◽  
Vol 51 (3) ◽  
pp. 801-837 ◽  
Author(s):  
Jie Cai ◽  
Ralph A. Walkling ◽  
Ke Yang
Keyword(s):  
Social Ties ◽  
Leisure Activities ◽  
Informed Trading ◽  
Trading Costs ◽  
Natural Experiments ◽  
Positive Relation ◽  
Privileged Information ◽  
Trading Activities ◽  
Stock Transaction ◽  
The Cost

AbstractRecent studies suggest the transfer of privileged information via social ties but do not explicitly examine the cost of these ties to shareholders. We document a significant positive relation between stock transaction costs and a company’s social ties to the investment community. Social ties based on education and leisure activities, stronger ties, and ties to individuals responsible for trading have greater effects. Using investment connection deaths as natural experiments, we document that exogenous severance of ties reduces trading costs and trading activities by connected parties. Our evidence illustrates an important and previously undocumented consequence of social ties.

scholarly journals Detecting Informed Trading Activities in the Options Markets

2012 ◽  
Author(s):  
Marc Chesney ◽  
Remo Crameri ◽  
Loriano Mancini
Keyword(s):  
Informed Trading ◽  
Options Markets ◽  
Trading Activities

Informed trading, noise trading and the cost of equity

2008 ◽  
Vol 17 (1) ◽  
pp. 13-32 ◽  
Author(s):  
Philippe Grégoire ◽  
Hui Huang
Keyword(s):  
Informed Trading ◽  
Cost Of Equity ◽  
Noise Trading ◽  
The Cost

scholarly journals Market Manipulation: An Adversarial Learning Framework for Detection and Evasion

2020 ◽  
Author(s):  
Xintong Wang ◽  
Michael P. Wellman
Keyword(s):  
Market Manipulation ◽  
Adversarial Learning ◽  
Market Making ◽  
Agent Based ◽  
Robust Detection ◽  
Detection Algorithms ◽  
Learning Framework ◽  
Trading Patterns ◽  
Trading Activities ◽  
Manipulation Strategy

We propose an adversarial learning framework to capture the evolving game between a regulator who develops tools to detect market manipulation and a manipulator who obfuscates actions to evade detection. The model includes three main parts: (1) a generator that learns to adapt original manipulation order streams to resemble trading patterns of a normal trader while preserving the manipulation intent; (2) a discriminator that differentiates the adversarially adapted manipulation order streams from normal trading activities; and (3) an agent-based simulator that evaluates the manipulation effect of adapted outputs. We conduct experiments on simulated order streams associated with a manipulator and a market-making agent respectively. We show examples of adapted manipulation order streams that mimic a specified market maker's quoting patterns and appear qualitatively different from the original manipulation strategy we implemented in the simulator. These results demonstrate the possibility of automatically generating a diverse set of (unseen) manipulation strategies that can facilitate the training of more robust detection algorithms.

scholarly journals Detecting Informed Trading Activities in the Options Markets: Appendix on Subprime Financial Crisis

2012 ◽  
Author(s):  
Marc Chesney ◽  
Remo Crameri ◽  
Loriano Mancini
Keyword(s):  
Financial Crisis ◽  
Informed Trading ◽  
Options Markets ◽  
Trading Activities

scholarly journals Corporate governance and the divergence of learning channels

2011 ◽  
Vol 8 (3) ◽  
pp. 9-17
Author(s):  
William Ming Yan Cheung ◽  
Adrian Lei ◽  
Libin Tao
Keyword(s):  
Corporate Governance ◽  
Stock Prices ◽  
Stock Price ◽  
Informed Trading ◽  
Market Liquidity ◽  
Price Informativeness ◽  
Cross Sectional ◽  
Bid Ask Spread ◽  
Trading Activities ◽  
Stock Price Informativeness

We study the relation between corporate governance, market liquidity and stock price informativeness. Firms with more informative stock prices are associated with larger transaction volume, larger bid-ask spread and better corporate governance. Thisliquidity-informativeness relation is significant for firms with high antitakeover provision (bad corporate governance). However, bid-ask spread is insignificantly associated withprice informativeness for firms with less antitakeover provision (good corporate governance). This supports that firm-specific return variation better measures stock price informativeness when firm has strong corporate governance framework. Our results suggest that (i) more (less) informed trading activities associated with weak (strong) corporate governance, and (ii) corporate governance explains the cross-sectional variation in information efficiency of stock prices. Our results are consistent with theories in financial market learning that investor learn from informed trading activities associated with weak governance firms and informative disclosure from strong governance firms.

Informed Trading and the Market Reaction to Accounting Restatements

2011 ◽  
Vol 86 (5) ◽  
pp. 1519-1547 ◽  
Author(s):  
Brad A Badertscher ◽  
S. Paul Hribar ◽  
Nicole Thorne Jenkins
Keyword(s):  
Insider Trading ◽  
Market Reaction ◽  
Informed Trading ◽  
Data Availability ◽  
Stock Repurchases ◽  
Reverse Causality ◽  
Accounting Restatements ◽  
Market Reactions ◽  
Trading Activities ◽  
The Difference

ABSTRACT We examine how informed trading activities affect the market reaction to accounting restatements. We find significantly less negative reactions to accounting restatements when managers are net purchasers of stock before the restatement, and significantly more negative market reactions when managers are net sellers. Similar patterns characterize corporate trading, where prior stock repurchases dampen negative reactions and prior equity issuances increase negative reactions to the restatement. We address the possibility of reverse causality in which informed trades are undertaken because of the expected market reaction by examining the difference between disclosed and non-disclosed trades, finding that the market reaction is concentrated in the disclosed trades. Our results are incremental to general return patterns associated with insider trading and corporate equity transactions, and hold after controlling for other determinants of the market reaction to restatements. Taken together, these findings suggest that investors use informed trading activities to help interpret and price accounting restatements. JEL Classifications: M41, M42. Data Availability: Data are publicly available from the sources identified in the study.

The effect of short-sale restrictions: another perspective

2016 ◽  
Vol 12 (5) ◽  
pp. 700-714
Author(s):  
Van Le
Keyword(s):  
Design Methodology ◽  
Informed Trading ◽  
Panel Regression ◽  
Information Share ◽  
Option Markets ◽  
Policy Makers ◽  
Content Type ◽  
Short Sale ◽  
Regulatory Changes ◽  
Trading Activities

Purpose The purpose of this paper is to examine the effect of short-sale restrictions (SSR) with particular emphasis on their impact on the liquidity and informed trading in the stock and option markets. Design/methodology/approach Using a panel regression with controls for volatility, VIX and matched stocks, this study examines the effect of the short-sale ban (SSB) on stock and option liquidity, expressed in terms of spread and volume. In addition, the PIN and option information share (OIS) measures have been used to analyze its impact on informed trading in those related markets. Findings The results suggest that the SSB leads to a significant reduction in the liquidity of the affected stocks and their options. However, no significant change in the trader composition can be detected. This result is consistent to the short-prohibition effect predicted by Diamond and Verrecchia (1987). Research limitations/implications Due to the sizeable data required to estimate the PIN and OIS measures, only a select sample of optionable stocks has been examined. Originality/value This study offers both academics and policy makers some useful insights into the effect of SSR on trading activities in both stock and option markets. From a policy perspective, it clearly demonstrates that regulatory changes targeting a specific market also affect other related markets via the arbitrage link between them.

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