Article history: Received 2 March 2015 Received in revised form 19 May 2015 Accepted 26 May 2015 Available online 9 June 2015 Wecombine two concepts of informed trading – contrarian trades and stealth trading – to develop proxies for the probability of informed trading. These proxies are used to test the link between informed trading and adverse selection asmeasuredbybid–ask spreads and stock i...

We find that market reactions to an analyst’s earnings forecasts are weaker when conditioned on the number of prior sell recommendations that the analyst makes for other firms that he follows. This effect is most prominent in periods of high market sentiment (e.g., the 1997-2001 period) and is stronger for glamour firms. This effect does not arise from sell recommendations being a proxy for low...

Like many financial contracts, derivatives are subject to default risk. A very popular mechanism in derivatives markets to mitigate the risk of non-performance on contracts is margining. By attaching collateral to a contract, margining supposedly reduces default risk. The broader impacts of the different types of margins are more ambiguous, however. In this paper we develop both, a theoretical ...

In this paper, we investigate the determinants of credit default swap (CDS) spread for the Japanese market, which is one of the major CDS markets in the world. Our assessment of literature indicates that there is a lack of related empirical research using data from the Japanese market. By analyzing data from 2001 to 2004, the empirical results show that the theoretical determinants, including l...

The Securities and Exchange Commission adopted Rule 11Ac1-5 on November 15, 2000. The rule requires market centers to make monthly electronic disclosures of basic information regarding execution quality. The rule is intended to empower market forces with the means to achieve a more competitive and efficient national market system by increasing the visibility of execution quality. We find that t...

Given a financial network of liabilities, we consider the following question: which agent’s potential default would implicate the most number of agents in the network structure? Simply comparing each agent’s total debt completely ignores the structure of the network. For propagation effects of a potential default, owing to a creditor who does not owe anybody and owing to a creditor who is heavi...

This article examines how the number of stochastic drivers and their associated volatility structures affect pricing accuracy and hedging performance in the swaption market. In spite of the fact that low dimensional one and two-factor models do not reflect historical correlations that exist among forward rates, we show that they are capable of accurately pricing swaptions as well as higher orde...