Transaction Costs and the Asymmetric Price Impact of Block Trades

The article examines the impact of transaction costs on the trading strategy of informed institutional investors in a sequential trading market where traders can choose to transact a large or a small amount of stock. The analysis shows how the trading strategy of informed investors and the price impact of their trades depends on market conditions. The main prediction of the model is that institutional buyers are, on average, more aggressive than institutional sellers in bearish markets and less aggressive in bullish markets. Hence, the price impact is higher for purchases when market conditions are bearish, while it is higher for sales when market conditions are bullish. However, this asymmetry vanishes during strongly bearish or bullish phases, when information-based orders stop because the informational advantage of institutional investors becomes too small with respect to the transaction costs

Index tracking in Australian equities

The growth in passive investment management has been significant over the last decade. Total assets benchmarked to the S&P SOO index exceed US$I trillion, and a similar experience of investors embracing indexing have been recorded across other Western countries, including the UK, Canada and Australia

Minimum wages and their role in the process and incentives to bargain

The study is based on four sources of data: (a) a survey of over 11,500 non-public sector organisations, (b) quantitative analysis of over 25,000 enterprise agreements, (c) qualitative analysis of 91 strategically selected agreements; and (d) 20 workplace case studies. Key findings (indicative) Organisations commonly used a number of pay-setting arrangements for their employees, with individual arrangements (at 65 per cent of organisations) and award based arrangements (52 per cent) the most common. The quantitative analysis of enterprise agreements found that that there may be a positive association between wage increases in enterprise agreements and Annual Wage Review increases. This was particularly the case for industries with higher proportions of agreements paying low wage increases and with a large number of award-reliant employees. The qualitative analysis of agreements identified the importance of distinguishing between agreements that are ‘award-reliant’, ‘slightly above award’ (i.e. pay modest over-awards) and ‘over-award’ (i.e. pay substantial amounts more than the award).  External relativities (i.e. differences in pay for exemplar or reference classifications common across employers) were dispersed among all industries considered. Internal relativities within agreements were very similar to those in their related awards. The case studies found little direct impact of Annual Wage Review decisions on wage outcomes or pay-setting processes – they are best conceived as third order factors shaping both. Conclusion While the direct impact of Annual Wage Review decisions was perceived to be limited at the work sites studied, this is not the whole story. The analysis of agreements revealed that there may be positive significant associations between Annual Wage Review increases and agreement content. The workplace cases in general, and the relativities analysis in particular, revealed that awards profoundly shape wage outcomes and the wage determination process.  In particular, the agreement and case study findings highlighted the importance of not conceiving the different pay-setting arrangements in mutually exclusive terms. If the Annual Wage Review increases examined are conceived as being part of an ongoing evolution of the award system, then their impact is better understood as being very significant, primarily because such increases are an integral part of labour standard regime that conditions workplace behaviour and shapes wage outcomes. This appears to be especially the case in those parts of the labour market paying below median wages

LACTOSE TO NATURALIZE TEXTILE DYES

Many natural dyes, for example carminic acid, are soluble in water. We present a simple strategy to naturalize synthetic azadyes through their linkage with lactose to induce their water solubility. The dyeing process of textile fibres then becomes possible in water without additives such as surfactants and mordants, which result in products that are difficult to eliminate. Glyco-azadyes (GADs) we are presenting here are obtained through a diether linker to bond the azadye and the sugar. Tinctorial tests were carried out with fabrics containing wool, polyester, cotton, nylon, and acetate. GADs were found to be multipurpose and capable of dyeing many fabrics efficiently under mild conditions

The Black Scholes Call Option Pricing Model and the Australian Options Market: Where Are We After 15 Years

The Black Scholes model has not been tested in Australia for about 10 years implying tests previously carried out used data from a developing options market. This study carries out cross sectional tests of the model using the most recent data available. The conclusion, unlike earlier studies, is that the Black Scholes model cannot be rejected, and thus that the market is efficiently pricing options in an unbiased manner (in a Black Scholes sense), or alternatively, that model is capable of effectively pricing options. A unique time series analysis of mispricing is also carried out in order to determine whether this can be attributed to a ‘market learning effect' over time. There is some evidence of such an effect. The tests differ from those of previous studies in a number of ways. One of the major limitations of past studies is overcome as the tests do not depend on historical measures of volatility. Special care is taken to exclude possible misleading observations occurring from non-synchronous share option prices. The effects of dividends and the possibility of early exercise are dealt with by exclusion. Controls are also used to limit the possibility of incompatible risk free interest rate proxies having a confounding effect on results

Transaction costs and the asymetric price impact of block trades

The article examines the impact of transaction costs on the trading strategy of informed institutional investors in a sequential trading market where traders can choose to transact a large or a small amounts of stock. The analysis shows how the trading strategy of informed investors and the price impact of their trades depends on market conditions. The main prediction of the model is that institutional buyers are, on average, more aggressive than institutional sellers in bearish markets and less aggressive in bullish markets. Hence, the price impact is higher for purchases when market conditions are bearish, while it is higher for sales when market conditions are bullish. However, this asymmetry vanishes during strongly bearish or bullish phases, when information-based orders stop because the informational advantage of institutional investors becomes too small with respect to the transaction costs

Short-selling and credit default swap spreads—Where do informed traders trade?

© 2018 Wiley Periodicals, Inc. During the global financial crisis, short-selling and credit default swaps (CDS) gained notoriety as indicators of financial collapse. This paper extends the literature by examining the relationship between short-selling and CDS spreads. Results indicate that lagged short-selling metrics forecast changes in CDS spreads; short-selling is found to have a positive relationship with CDS spreads. These results are robust to various controls including the supply of stock for short-selling, changes in CDS spreads, cross-sectional controls for fixed effects, sub-group analysis by industry sector, and the use of contemporaneous explanatory variables. This suggests that informed traders prefer to short-sell the underlying stocks

The Impact of Underlying Market Closure on Futures Market Liquidity: Evidence from China

This study investigates the trading activity of Chinese stock index futures, recently introduced at the open and close of the underlying trading. We document the impact of the underlying spot on the futures market liquidity as well as volatility as discussed in earlier works on market closure theory. Our empirical results support previous literature on the impact of the underlying, particularly during the open session, as a contagion effect, which is clearly at play. We find significant U-shaped patterns in liquidity factors and intraday volatility during open and close trades in the morning

Portfolio optimization and index tracking for the shipping stock and freight markets using evolutionary algorithms

This paper reproduces the performance of an international market capitalization shipping stock index and two physical shipping indexes by investing only in US stock portfolios. The index-tracking problem is addressed using the differential evolution algorithm and the genetic algorithm. Portfolios are constructed by a subset of stocks picked from the shipping or the Dow Jones Composite Average indexes. To test the performance of the heuristics, three different trading scenarios are examined: annually, quarterly and monthly rebalancing, accounting for transaction costs where necessary. Competing portfolios are also assessed through predictive ability tests. Overall, the proposed investment strategies carry less risk compared to the tracked benchmark indexes while providing investors the opportunity to efficiently replic ate the performance of both the stock and physical shipping indexes in the most cost-effective way