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
Yang (Kevin) Sun, Petko Kalev, Huu Nhan Duong, Erik Theissen ⋅ SummaryDownload full article
Latest research from CMCRC
  • 21-01-2013 Are rules and their enforcement effective at mitigating insider trading? A study shows that rules and surveillance together have the potential to mitigate the perpetration of market manipulation but also to exacerbate the profits from such manipulative activities.
    Professor Douglas Cumming, Feng Zhan, Professor Michael Aitken ⋅ SummaryPress releaseDownload full article
  • 12-01-2013 CMCRC research examining US equities shows that Quality stocks, and mutual funds which invest in these Quality stocks, provide downside protection during financial market crises.
    David R. Gallagher, Peter A. Gardner, Camille H. Schmidt, Terry S. Walter ⋅ SummaryPress releaseDownload full article
  • 02-12-2013 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.
    Zhe Chen, F Douglas Foster, David R Gallagher, Adrian D Lee ⋅ SummaryDownload full article
  • 06-11-2013 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.
    Douglas Cumming, Feng Zhan, Michael Aitken ⋅ SummaryNews releaseDownload full article
  • 31-10-2013 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.
    James Curran, Will Radford ⋅ SummaryDownload full article
  • 09-10-2013 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.
    Frino A, Satchell S, Wong B, Zheng H ⋅ SummaryDownload full article
  • 01-10-2013 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'?
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