Abstract

In this article, we examine stock exchange trading rules for market manipulation, insider
trading, and broker-agency conflict, across countries and over time, in 42 stock exchanges around
the world. Some stock exchanges have extremely detailed rules that explicitly prohibit specific
manipulative practices, but others use less precise and broadly framed rules. We create new
indices for market manipulation, insider trading, and broker-agency conflict based on the specific
provisions in the trading rules of each stock exchange. We show that differences in exchange
trading rules, over time and across markets, significantly affect liquidity.

 ETR_01Feb2010.pdf (PDF)

Proffessor Michael Aitken reviews the highlights of the paper "Trade-Based Manipulation and Market Efficiency across Equity Markets Worldwide", 2000-2005, by Professor Michael Aitken, Professor Rick H De.B Harris and Ji Shan, in "Does market integrity matter" and "Where does Australia stand in the market integrity league". In his third piece Professor Aitken gives his opinion on "Key changes necessary to ensure market integrity".

Trade-Based Manipulation and Market Efficiency...

• Does market integrity matter
• Where does Australia stand in the market integrity league
• Key changes necessary to ensure market integrity

Abstract

Investment performance studies of pension or mutual funds have overall been too statistically inconclusive to create definitive rankings to help investors make fund selection decisions. This paper presents an alternative approach based on comparing the pension or mutual fund firms themselves which are highly diversified composite portfolios aggregated over all individual portfolios managed by the firms. Performance data of managed fund firms are more useful for investors because we show here that their statistics are more stable and predictable than those of individual portfolios which are subject to more random influences such as selection bias. This paper overcomes the pitfalls of the Sharpe ratio in ex-post performance ranking by using a new metric for the performance of the composite portfolio of a firm. The metric is risk-adjusted by the volatility of the firm's benchmark, defined by the aggregate asset allocation of the firm. In an empirical study using unique data, we measure the performance of 115 major Australian superannuation firms. The results show that using the new metric the investment performance ranking of the firms is persistent. We identify that higher operational costs are correlated significantly with lower net investment performance. We indicate how the performance ranking of the firms can help investors make fund selection decisions.

sa_wp_iprsf_062009_ex.pdf (PDF)