A new study by CMCRC researchers suggests that companies may be able to
influence the level of algorithmic trading (AT) by adjusting their price level.
The research shows that, stocks with lower relative tick size experience faster
cancelation, deletion or trade times and higher order to trade ratios vis-à-vis
firms with larger relative ticks. The research suggests stocks with a smaller
relative tick size attract more AT and conversely a firm may limit the proportion of AT in their stock by undertaking a stock split which will increase a firm’s relative tick and the cost of price improvement to be offered by AT.
What is causing the growth in dark pools? New research from the Capital
Markets Cooperative Research Centre (CMCRC), forthcoming in the Journal of Financial Economics, has found that SEC trading rules may be providing dark pool venues a regulatory advantage over traditional stock exchanges by
allowing some traders to circumvent time priority, leading to the rapid
growth of dark trading in U.S. equity markets.
Underwriters of dividend re-investment plans have a legitimate interest in hedging their exposure by going short. However new evidence from CMCRC
researchers finds significant abnormal selling volume in the underwriting broker’s channel during the pricing period resulting in a lower issue price.
Motivated by ongoing debates on investment-cash flow sensitivity (ICFS), its relation to firm-level financial constraints and its documented decline in the U.S., we investigate the determinants of cross-country and time-series variation in ICFS. Using firm-level data across 45 countries for the 1991–2010 period, we document a strong decline in ICFS for both developed and emerging countries. Results indicate that changes in financial development and shifts in investment towards liquid and intangible assets are important in explaining the patterns in ICFS. However, unlike ICFS, the cash flow sensitivity of cash (CCFS) shows no decline over time, which is consistent with inter-temporal optimization in cash-retention.
Can official announcements stipulated in insider trading legislation fulfill their purpose to significantly reduce information asymmetry? A recent study says yes, and in doing so develops a new intraday estimation procedure to measure information asymmetry.
A new study by CMCRC researchers James Melouney and Dr. Matthew Clifton report that a trading strategy based on short-selling information can be used to develop several stock portfolios, achieving annual returns ranging from 0.2118% to 6.3015% after transaction costs. Short-selling
refers to the selling of stocks one does not currently own and subsequently purchasing them to close or cover the position, allowing individuals to profit from downturns in stock prices. Many have argued that short-selling plays a role in price discovery and consequently can be used as a signal for future price performance.
CMCRC research reports the efficiency of opening prices is associated with the stock-specific open-auction sequence on the ASX. The sequential nature of the Australian opening auction implies that some stocks always open before other. For a stock that opens down sequence, the price-relevant information may be extracted from the trading process of comparable stocks in earlier batches in addition to the preopening order evolution.
Investors who submit their orders on late opening stocks can revise their expectation of equilibrium value by observing the order flow information from stocks that commence continuous trading earlier.
Australia equity markets have the distinctive feature of a single price auction where stocks open for trading with a delay in alphabetical sequence rather than simultaneously. Our analysis focuses on the learning process that could potentially occur across stocks before opening. Investors who trade stocks in later batches could exploit trading information