Three Essays on Informed Trading

This thesis consists of three essays examining the behavior of informed traders in financial markets and how they affect asset pricing. It examines informed traders’ role in shaping securities prices in three ways. It examines whether on a macro and micro basis insider traders move prices to a different degree than non-insiders. In addition, it uses econometric methods to determine what exchange generates permanent price trends in UK shares. Lastly, it looks at another side effect of fragmentation – how a ‘best execution’ mandate and related market structure changes affect transactions costs in liquid UK, French, and German shares. These studies expand on current literature in various ways – extant insider trading literature has either primarily focused on daily price movement and volume or had consisted of case studies, the conclusions of which may be idiosyncratic and therefore unrepresentative of typical insider behavior. The new phenomenon of multilateral trading facilities (also known as electronic communications networks) and the proliferation of algorithmic or computer-mediated trading had not been examined in price discovery papers, due to their relative novelty. In addition, despite a bevy of literature offering informed insight into the impact of the European Union’s Markets in Financial Instruments Directive (MiFID), there has been a dearth of empirical studies assessing its impact on European securities markets. Chapters 2 and 3 examine MiFID and computerized trading from two different perspectives: that of which trades lead to permanent prices, and that of transactions costs. The conclusions drawn in this thesis will be of interest to regulators, market operators, and traders, as they offer insight into the impact of market structure and how it impacts informed traders who participate in them

Leaders and Laggards: International Evidence on Spillovers in Returns, Variance, and Trading Volume

This paper investigates the dynamic relationship between index returns, return volatility, and trading volume for eight Asian markets and the US. We find crossborder spillovers in returns to be nonexisting, spillovers in absolute returns between Asia and the US to be strong in both directions, and spillovers in variance to run from Asia to the US. Trading volume, especially on the Asian markets, depends on shocks in domestic and foreign returns as well as on variance, especially those shocks originating in the US. However, only weak evidence is found for trading volume influencing other variables. --Financial spillovers,trading volume,Asian crisis

Aggregate insider trading and stock market volatility in the UK

Data availability: Data will be made available on request.Copyright © 2023 The Author(s). This paper examines the relationship between aggregate insider trading (AIT) and stock market volatility using monthly data on insider transactions by UK executives in public limited com panies for the period January 2002 - December 2020. More specifically, a Vector Autoregression (VAR) model is estimated, and impulse response analysis is carried out. The main finding is that higher AIT (more specifically, insider purchases) leads to a short-run increase in stock market volatility; this can be attributed to a combination of insiders manipulating the timing and content of the information they release and the revelation of new economy-wide information to the market. The UK being a well-regulated market, it is plausible that the main driver of the increase in stock market volatility should be the information effect. These results are shown to be robust to using alternative (direct) measures of AIT

The History of the Quantitative Methods in Finance Conference Series. 1992-2007

This report charts the history of the Quantitative Methods in Finance (QMF) conference from its beginning in 1993 to the 15th conference in 2007. It lists alphabetically the 1037 speakers who presented at all 15 conferences and the titles of their papers.

The Monetary Origins of Asymmetric Information in International Equity Markets

Existing studies using low-frequency data show that macroeconomic shocks contribute little to international stock market covariation. Those studies, however, do not account for the presence of asymmetric information, where sophisticated investors generate private information about the fundamentals that drive returns in many countries. In this paper, the authors use a new microstructure data set to better identify the effects of private and public information shocks about U.S. interest rates and equity returns. High-frequency private and public information shocks help forecast domestic money and equity returns over daily and weekly intervals. In addition, these shocks are components of factors that are priced in a model of the cross-section of international returns. Linking private information to U.S. macroeconomic factors is useful for many domestic and international asset-pricing tests.Financial markets; International topics; Market structure and pricing

A review of research on regulation changes in the Asia-Pacific region

In this study, we review the financial research on regulation in the Asia-Pacific region. We do this by analysing six leading regional accounting and finance journals – Abacus, Accounting & Finance, Australian Accounting Review, Australian Journal of Management, International Review of Finance and the Pacific-Basin Finance Journal. We identify five main themes of regulation research relating to: (i) banking and financial institutions, (ii) markets and trading, (iii) corporate governance, (iv) disclosure and (v) accounting standard setting. Our paper synthesises the regional literature in these areas and provide some suggestions for future directions

AN ASSESSMENT OF THE IMPACT OF CORPORATE GOVERNANCE MECHANISMS AND PRINCIPLES ON CORPORATE PERFORMANCE: THE CASE OF THE UAE

This research is concerned with investigating the effect of selected internal and external corporate governance mechanisms and principles on UAE corporate performance. The UAE started to apply uniform corporate governance standards in 2009 with the introduction of Resolution No. (518) of 2009 concerning Governance Rules and Corporate Discipline by the regulator SCA. Since then, there have been various rules implemented by the regulator in 2016 and 2020. Corporate governance has been in the spotlight of academic research, particularly in the United States and Europe, due to the vital role it plays in the overall health of economic systems. In the UAE, most existing research in this area predates the implementation of the Commercial Companies Act (2015), and the UAE Corporate Governance Code (Resolution No. (7 R.M) of 2016). Studies showed that the existing research conducted under the now-repealed law Ministerial Resolution No. 518 of 2009 failed to closely engage with the applicable legal principles. Therefore, there is a gap in corporate governance research in the UAE which makes this a valuable topic for this dissertation and for future research. This research explores corporate governance reforms in the UAE and their effect on listed companies’ performance from 2017 to 2020. The sample firms are listed on either the Abu Dhabi Exchange (ADX) or the Dubai Financial Market (DFM). Regression analysis and a mixed linear effects model were employed to test the hypotheses of the study, and a survey and interviews were conducted to test the principles and mechanisms of corporate governance quantitatively and qualitatively. The conceptual framework of this dissertation describes how corporate governance principles and mechanisms impact corporate performance. In the framework, corporate governance principles are based on the Organization of Economic Cooperation and Development (OECD) Principles of Corporate Governance. The corporate governance mechanisms are board member experience, gender, insider trading, auditor rotation, and internal controls. Corporate performance was assessed using return on assets, return on equity, and Tobin’s Q. This dissertation uses both agency and stakeholder theories to investigate how corporate governance can affect corporate performance in the UAE. To accomplish the research objectives, a mixed methods research model was adopted using both quantitative methods (questionnaire and secondary data) and qualitative methods (interviews). Secondary data was obtained from the annual corporate governance reports of listed companies on the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX). The data were analyzed using the Statistical Package for the Social Sciences (SPSS, Version 28) and STATA 17 statistical package. Qualitative results were analyzed using NVIVO12. The results of the questionnaire show that corporate governance principles have been implemented in listed companies and board responsibilities, and shareholder rights have the highest scores indicating that board responsibilities are taken seriously, and shareholders’ rights are protected. In the second model, auditor rotation and insider trading were statistically significant. The interviews revealed that the main priorities for the interviewees were market transparency and corporate performance. This research will benefit listed organizations, regulators, securities lawyers, and academics. It is worth noting that the UAE has one of the most sophisticated corporate governance legal frameworks in the Middle East. Therefore, these research findings will also be beneficial to other Middle Eastern countries and their policymakers

When Insider Trading and Market Manipulation Cross Jurisdictions. What Are the Challenges For Securities Regulators and How Can They Best Preserve the Integrity of Markets?

Over the last few decades world securities markets have become significantly more sophisticated in terms of how securities are traded as well as the variety of securities traded. My hypothesis is that the ability of securities regulators to take enforcement action against market abuse has not kept pace with the level of sophistication of the markets and, in particular, the way in which trading can take place across borders and the manner in which market related information can spread rapidly across the world. I argue that that regulators need to do more to protect the integrity of the markets by improving their efforts to initiate action against market abuse. Furthermore, given the global nature of the problem I argue that the International Organization of Securities Commissions (IOSCO) should be more proactive in coordinating the activities of securities regulators in this regard. I commence with an analysis of why the integrity of securities markets is critical to the economy of a country and why it is necessary for regulators to enforce laws prohibiting market abuse in order to protect market integrity. I then move on to identify the changes to securities markets, the regulatory responses to these changes, trends in the types of market abuse which is taking place across borders and how those responsible for taking enforcement action against such market abuse have responded. Finally I consider IOSCO, its history, how its role has evolved, its impact to date and how IOSCO could build upon its success in terms of improving the enforcement outcomes of securities regulators in relation to market abuse. I conclude that the transformation of the markets have presented opportunities to engage in market abuse across borders and that, while some positive steps have been taken to address this issue, more could be achieved. Finally I discuss and make recommendations about what might be done to improve the ability of securities regulators to take successful enforcement action