Stocks with recent past high idiosyncratic volatility have low future average returns around the world. Across 23 developed markets, the difference in average returns between the extreme quintile portfolios sorted on idiosyncratic volatility is 1:31% per month, after controlling for world market, size, and value factors. The effect is individually significant in each G7 country. In the United S...

In this paper, we examine the pro…tability from a convergence trading strategy called pairs trading which bets that a pair of stocks with price paths that have historically moved together will eventually converge if they ever diverge. We …nd that the pro…tability from pairs trading is greatest soon after the pairs diverge and that the pro…tability is strongly related to events around the date o...

We apply machine learning methods to obtain an index arbitrage strategy. In particular, we employ linear regression and support vector regression (SVR) onto the prices of an exchange-traded fund and a stream of stocks. By using principal component analysis (PCA) in reducing the dimension of feature space, we observe the benefit and note the issues in application of SVR. To generate trading sign...

We study the causal effect of trading on stock market liquidity. We exploit episodes of sensational news (exogenous to the market) that distract retail investors. On “distraction days” we find that trading activity, liquidity, and volatility all decline among stocks owned predominantly by retail investors. These findings, complemented by additional tests, establish that retail investors contrib...

This paper aims to provide better stock market watching through user friendly, efficient, and convenient mobile based system. It allows investors to monitor financial market using short message service (SMS). On one hand, our system sends the trading prices of stocks to customers as these prices change. On the other hand customers can inquire about trading summary. Also our system contains seve...

The Epps effect, the decrease of correlations between stock returns for short time windows, was traced back to the trading asynchronicity and to the occasional lead-lag relation between the prices. We study pairs of stocks where the latter is negligible and confirm the importance of asynchronicity but point out that alone these aspects are insufficient to give account for the whole effect.

There are numerous studies suggesting that published news stories have an important effect on the direction of the stock market, its volatility, the volume of trades, and the value of individual stocks mentioned in the news. There is even some published research suggesting that automated sentiment analysis of news documents, quarterly reports, blogs and/or twitter data can be productively used ...

Throughout their history, puts and calls [1] on common stock have been criticized as mere gambling opportunities. Recently, the creation of listed options on the Chicago Board Options Exchange, the American Stock Exchange and three regional exchanges in the United States, has given new respectability to options as investment vehicles. By year-end 1977, listed options to 217 common stocks were a...

Modern electronic markets have been characterized by a relentless drive towards faster decision making. Significant technological investments have led to dramatic improvements in latency, the delay between a trading decision and the resulting trade execution. We describe a theoretical model for the quantitative valuation of latency. Our model provides a closed-form expression for the cost of la...