The stock selection problem is one of the major issues in the investment industry, which is mainly solved by analyzing financial ratios. However, considering the complexity and imprecise patterns of the stock market, obvious and easy-to-understand investment rules, based on fundamental analysis, are difficult to obtain. Fundamental and technical analyses are two common methods for predicting th...

This paper examines the choice of trading venue by dealers in U.S. Treasury securities to determine when services provided by human intermediaries are difficult to replicate in fully automated trading systems. When Treasury securities go “off the run” their trading volume drops by more than 90%. This decline in trading volume allows us to test whether intermediaries’ knowledge of the market and...

We find that weekend, holiday and overnight trading breaks generate excessive perceived risk in the option markets, presumably due to asymmetric information, which, in turn, encourages uninformed option traders to postpone trading. This perceived risk subsides after two days accompanied by an increase in the option trading volume and the underlying index’s actual price volatility. These results...

This paper examines the relationships between Internet message-board activity and abnormal stock returns and between Internet message-board activity and abnormal trading volume. This study focuses on RagingBull.com and Internet service sector stocks. I choose RagingBull.com because its format enables me to measure investor opinion objectively. I find that on days with abnormally high message ac...

Stocks with better past returns crash more than other stocks on May 6, 2010. I find evidence that this is related to such stocks being unattractive to contrarian buyers. This suggests the importance of contrarian investors in stabilizing price fluctuations. However, the glass is half full---that the contrarian investors shun certain types of stocks limits the extent of price stability that reli...

We examine whether short sellers predominantly target stocks with recent price declines, amplifying the price decline and resulting in prices falling below fundamental values, or target apparently overpriced stocks facilitating prices that reflect fundamental values. We find evidence of short-sellers holding significant positions in stocks following price declines, and of short-sellers increasi...

Researchers often refer to investment habitats/categories to explain the patterns of comovement in asset returns that cannot be fully clarified by fundamentals. Many factors determine these habitats including investor preferences to size, industry, price-levels and risk-levels. This paper investigates a unique method to explore investment habitat based on the search behavior of investors on the...

We discuss optimal trading strategies for general utility functions in portfolios of cash and stocks subject to small proportional transaction costs. We present a new interpretation of scalings found by Soner, Shreve, and others. To leading order in the small transaction cost parameter, the free boundary problem for the expected utility’s value function is shown to be dual, in the sense of Lagr...

A unlt-hnked hfe insurance contract ~s a contract where the insurance benefits depend on the price of some specific traded stocks We consider a model describing the uncertainty of the financial market and a portfoho of insured individuals simultaneously. Due to incompleteness the insurance claims cannot be hedged completely by trading stocks and bonds only, leawng some risk to the insurer. The ...

We test the hypothesis that status preference amplifies trading activity in stock markets. This preference leads to demand for local stocks to track neighbors that rises with the stock market and generates trading between status and non-status seekers. We use an empirical design from China, where we measure intensity of status concerns by province based on income and luxury brand internet searc...