An emulation fund collects trade signals from a sponsor’s multi-manager portfolio (e.g. a superannuation fund that hires a number of underlying active managers to make trading decisions) and rebalances on a lagged basis to match its holdings. In this new research we test the effectiveness of an emulation portfolio relative to the fund of funds it is tracking, and identify where the costs and benefits arise. This study suggest that investment funds have short-term timing skill when executing trades - hence, from a purely pre-tax, trading returns perspective, the emulation portfolio incurs a small but economically significant opportunity cost. However, this may be compensated for by reductions in active management fees and tax savings, which vary from fund to fund.
Our paper is among the first to provide an empirical assessment as to whether High Frequency Trading (HFT) has a positive effect on market fairness. We find the presence of HFT has significantly mitigated the frequency and severity of price dislocation and the likelihood of manipulation, counter to recent concerns expressed in the media that HFT exacerbates market manipulation. Taken together with the existing evidence that HFT reduces transactions costs and enhances price discovery, we demonstrate not only how market fairness can be operationalized, but how it can be used in market structure decisions.
A study by CMCRC researchers presents a fresh look at extracting apposition from large collections of news, web and broadcast text in order to turn unstructured news stories into “computable data”. News is about interactions between entities ‐ people, places and organisations ‐ and understanding stories requires interpreting the entities in them and their attributes.
This paper examines the choice of trade size by an illegal insider. Using a unique data set hand-collected from the litigation reports of the Securities and Exchange Commission and court cases, we provide evidence, which suggests that the size of an illegal insider's trade is a function of the value of his private information, the probability of detection and the expected penalty if detected.
There are certain stocks with similar characteristics to lottery tickets, though with a very small chance of winning and a negative average return, why would any investor choose to purchase such 'lottery stocks'?
A new study investigates whether an investment strategy which rotates between different investment styles based on macroeconomic signals adds economic value using stock and fund level data.
Study looks at combining text data and financial quantitative data to produce
a model for predicting a stocks daily return.