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on Market Microstructure |
| By: | Chris D'Souza |
| Abstract: | Trades in foreign exchange markets are initiated around the world and around the clock. This study illustrates that trades are more informative when initiated in a local country or in major foreign exchange centers like London and New York. Evidence suggests that informational asymmetries based on geography arise from the market making capacity of dealers and the customer order flow that dealers capture during regional business hours. Findings also show that market orders initiated in price-correlated FX markets are not informative. Transparency in quotes on electronic trading platforms may prevent informed participants from exploiting information across FX markets. Overall, these results are robust across different market conditions. |
| Keywords: | Market structure and pricing; Exchange rates; Financial markets |
| JEL: | F31 G15 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:07-52&r=mst |
| By: | Chulia-Soler, H; Martens, M.P.E.; Dijk, D.J.C. van (Erasmus Research Institute of Management (ERIM), RSM Erasmus University) |
| Abstract: | We study the impact of FOMC announcements of Federal funds target rate decisions on individual stock prices at the intraday level. We find that the returns, volatilities and correlations of the S&P100 index constituents only respond to the surprise component in the announcement, as measured by the change in the Federal funds futures rate. For example, an unexpected 25 basis points increase of the target rate leads on average to a 113 basis points negative market return within five minutes after the announcement. It also increases market volatility during the 60-minute window around the announcement with 147 basis points. Positive surprises, meaning bad news for stocks, provoke a stronger reaction than negative surprises. Market participants also respond differently to good and bad news. In case of bad news for stocks the fact that there is a surprise matters most, whereas in case of good news the magnitude of the surprise is more important. Across sectors, Financials and IT show the strongest response to target rate surprises. |
| Keywords: | monetary policy announcements;interest rate surprises;high-frequency data;realized volatility; |
| Date: | 2007–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:eureri:300011911&r=mst |
| By: | José M. Marín (IE Business School and IMDEA); Antoni Sureda-Gomila (Universitat Pompeu Fabra) |
| Abstract: | We explore the role of corporate insiders vs. firms as traders of last resort. We develop a simple model of insider trading in which insiders provide price support, as well as liquidity, in security markets. Consistent with the model predictions we find that in the US markets insiders’ trading activities have a clear impact on return distributions. Furthermore, we provide empirical evidence on insiders transactions and firm transactions affecting returns in a different manner. In particular, while insiders\' transactions (both purchases and sales) have a strong impact on skewness in the short run and to a lesser extent in short run volatility, company repurchases only have a clear impact on volatility, both in the short and the long run. We provide explanations for this asymmetry. |
| Keywords: | insider trading; liquidity; short-horizon variance; autocorrelation; skewness |
| JEL: | G11 G12 G14 G18 |
| Date: | 2007–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:imd:wpaper:wp2007-21&r=mst |