Descriptive Statistics
Descriptive statistics for the daily log-difference returns of the three market indexes and their corresponding ETFs are provided in Table 14.1. The statistics reported are the mean, the standard deviation, measures for skew-ness and kurtosis, the normality test, and the Ljung-Box LB test statistic for five lags. The skewness and kurtosis measures indicate departures from normality returns-series appear significantly negatively skewed and highly leptokurtic , something further confirmed by the...
Portfolio Formation
One of the most popular technical trading rules is the moving average or momentum rule.1 To implement the rule, two moving averages MAt h1 and MAt h2 are constructed using averaging windows with lengths h1 and h2. Trading signals are generated by crossovers the moving average MAt h1 crossing the moving average from MAt h2 below is interpreted as a signal to take a long position in the stock, crossing from above triggers the taking of a short position or the liquidation of a long position. Buy...
Contents
part I EXECUTION AND MOMENTUM TRADING 1 chapter 1 PERFORMANCE LEAKAGE AND VALUE DISCOUNTS ON THE TORONTO STOCK EXCHANGE 3 Lawrence Kryzanowski and Skander Lazrak Measures of Performance Leakage and Value Discounts 5 Empirical Estimates for the TSX 7 chapter 2 INFORMED TRADING IN PARALLEL AUCTION AND DEALER MARKETS THE CASE OF THE LONDON STOCK EXCHANGE 23 Pankaj K. Jain, Christine Jiang, Thomas H. McInish, and Institutional Background, Data, and Methodology 27 Alexander Molchanov and Philip A....
Hibor And Sibor
Interbank markets are very active in major international banking centers, such as New York, London, Singapore, and Hong Kong. Bank dealers bring global supply and demand to these markets in order to exchange for funds. They may also actively look for arbitrage opportunities. It would be very hard to find any evidence of market inefficiency in interbank markets for those actively traded products. A USD fund is an actively traded product in interbank markets of different regions. Interest rate...
Conclusion Kwm
This chapter provides new insights into the profitability of technical analysis by developing and testing a trading model that is shown to earn abnormal profits, and predict future price movements. The exponentially smoothed DMACO was tested on the S amp P 500, NASDAQ, and DJIA for the period January 1999 to April 2009. The results suggest that the profitability of DMACO is significantly enhanced when the STMA and LTMA are calculated with the exponential smoothing technique. The increased...
Introduction Sqk
The basic choices that a trader has to make refers to the type i.e., to trade via limit orders, market orders, or a combination of both , size, and timing of the orders that he or she is going to use to trade. This set of choices is called order placement strategy. In this chapter, we study how the optimal trader's order placement strategy differs across market structures. Markets use trading rules to arrange trades. As Harris 2003 points out, order precedence rules OPRs serve to match buyers...
Introduction Dke
This chapter explores the profitability of simple technical rules in the Athens Exchange Market ASE and particularly for the FTSE ASE 20 index. The FTSE ASE 20 is the most important index of the ASE and represents the 20 companies with the largest capitalization. The technical trading rules that we use to evaluate the profitability of technical analysis against the buy and hold strategy benchmark are variations of the simple moving average rule. Technical analysis forecasts the future direction...
Costs And Benefits Of Limit Order Trading
The order placement strategy depends on the relative merits and costs of limit orders and market orders Harris, 1998 . Let us first consider the costs and benefits from placing limit orders. Limit order traders bear two types of risks and costs Handa and Schwartz, 1996 . First, the risk of adverse informational change is known as ex-post regret or winner's curse. This risk materializes when the market price moves against the limit order trader. Bearish news may cause the price of the stock to...
Introduction Udf
Exchange-traded funds ETFs have constituted perhaps the most dynamically permeating innovation in capital markets during the last decade. In strictly conceptual terms, their underlying investments aim at mimicking 200 Part iii exchange-traded fund strategies the composition of a predetermined benchmark e.g., an index whose performance they track as these funds are publicly traded in stock exchanges like normal equity, this endows investors with the unique opportunity of trading an index through...
Introduction Imc
Since it was first reported by Jegadeesh and Titman 1993 , the momentum phenomenon has been extensively discussed in the literature. Based on the concept of Relative Strength by Levy 1967 , the authors argue that contrary to the neoclassic efficient market hypothesis, stock prices are auto-correlated. For the U.S. stock market they find that trading strategies that buy stocks which have performed well in the past and sell stocks that have performed poorly in the past can achieve abnormal...
Abstract Azp
Identifying ways to successfully predict security returns based on past returns is a major objective of investment research. One of the most important strategies, that of momentum Levy, 1967 Jegadeesh and Titman, 1993 Oehler et al., 2003 , is employed in this chapter. Using NYSE data from December 1994 to May 2009, we analyze whether buying stocks that have performed well in the past and selling stocks that have performed poorly in the past can generate significant positive returns, even in a...
Momentum Trading Results
We execute the following procedure to calculate momentum returns. The ranking period is defined as the period during which returns are calculated in order to rank the shares according to their relative return levels. The holding period is defined as the period after the ranking period, during which the returns from holding the shares are realized. Every month, for a specific ranking period, the returns of all shares are calculated and ranked. The top five winners are bought and the bottom five...
Data
We use only the largest shares that are traded in some of the most liquid markets. For a private investor it is relatively easy to find out which shares make up any of the main share indexes available. In these largest shares, a private investor will encounter very few, if any, problems when trading. Going short will usually be possible at reasonable costs, as there is ample supply. Moreover, the available price data will contain only a minimal amount of the distortions that are often found in...
Introduction Lfn
Since the seminal paper by Jegadeesh and Titman 1993 , who analyze returns to buying winners and selling losers, the so-called momentum effect has been highlighted by both academics and practitioners alike.1 The main presumption behind the momentum effect theory is that it is possible to predict future price movements based on past price trends. More specifically, past winners keep outperforming past losers. The momentum effect is of particular interest to researchers, as it is one of the best...
Introduction Sbg
The dual-moving average crossover DMACO trading strategy is one of the simplest, yet most popular trading rules among practitioners Taylor and Allen, 1992 Lui and Mole, 1998 . It is one of the few trading rules that is statistically well defined Neftci, 1991 . The DMACO is calculated with two moving averages of a security price. Relative to each other, one moving average is short term STMA , while the other long term LTMA . The LTMA will move in the same direction as the STMA, but will have a...
Gerasimos Rompotis
Background on the Moving Averages 157 Data 161 Trading with the Exponentially chapter 12 SHAREHOLDER DEMANDS AND THE Policy Purposes for Derivative Actions 173 Standing to Sue Derivatively 178 Futility Excuses the Demand Requirement 179 Futility, Director Independence, and Business part III EXCHANGE-TRADED FUND STRATEGIES 187 chapter 13 LEVERAGED EXCHANGE-TRADED FUNDS AND THEIR TRADING chapter 14 ON THE IMPACT OF EXCHANGE-TRADED FUNDS OVER NOISE TRADING EVIDENCE FROM Vasileios Kallinterakis and...
Contributors
Mohamed El Hedi Arouri is an associate professor of finance at the University of Orleans, France and a researcher at EDHEC Business School in France. He holds a master's degree in economics and a Ph.D. in finance from the University of Paris X Nanterre. His research focuses on the cost of capital, stock market integration, and international portfolio choice. He has published articles in refereed journals such as the International Journal of Business and Finance Research, Frontiers of Finance...