Novel Market Structure Insights From Intraday Data

19.November 2020

In recent years, financial markets have experienced a boom in passive and index-based strategies, which could have caused a change in the trading volume, volatility, beta or correlations. The reason is straightforward: the index investing causes a lot of stocks to move in the same direction. A novel research Shen and Shi (2020), using high-frequency data, suggests that over the last two decades, the patterns mentioned above have changed and the index investing is the cause. Both the trading volume and stock correlations are increased at the end of trading sessions. Betas are firstly dispersed, but in general, converge to one during the rest of the day. Trading volume has high dispersion at the market open, but low dispersion at the market close. Overall, the paper has many important implications for portfolio managers, risk managers and traders as well since it is closely related to the transaction costs, intraday price fluctuations, correlations or liquidity. Moreover, it is full of exciting charts that are worth seeing.

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Do Floor Traders Matter?

4.July 2020

The pandemic of COVID-19 brought many changes for the whole humanity. The financial markets where no exception, but the trading has continued. Nowadays, the order can be placed from anywhere around the world and almost all stock exchanges are electronic and algorithmic. However, there still is one exchange where the floor trading exists – NYSE. During these tough times, NYSE was also purely electronic, the floor trading was closed, and human interaction was not possible. A novel study by Brogaard, Ringgenberg and Roesch examines the role of floor traders in the recent era driven by computers. The conclusion is clear: in the current digital age, floor traders still matter.

Authors: Jonathan Brogaard, Matthew C. Ringgenberg, Dominik Roesch

Title: Does Floor Trading Matter?

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Did Automated Trading Resurrect the CAPM?

28.February 2020

Once upon a time, there was everybody’s favourite finance tool in a town – Capital Asset Pricing Model, which was liked and used by nearly everyone. But a few decades ago, it went out of fashion. Easier accessibility of cheap finance databases allowed a lot of researchers to dig deeper into those data. They uncovered a tremendous amount of evidence for a lot of market anomalies not consistent with CAPM. A new research paper written by Park and Wang shows that CAPM is maybe not completely useless. The rise of automated trading causes individual stocks’ returns to align more closely with the market. Intraday correlation in the equity market is rising, and so is the fraction of firms’ returns that are explained by market returns …

Authors: Park, Wang

Title: Did Trading Bots Resurrect the CAPM?

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