87,373 research outputs found

    Market depth and order size: an analysis of permanent price effects of DAX futures' trades

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    In this paper we empirically analyze the permanent price impact of trades by investigating the relation between unexpected net order flow and price changes. We use intraday data on German index futures. Our analysis based on a neural network model suggests that the assumption of a linear impact of orders on prices (which is often used in theoretical papers) is highly questionable. Therefore, empirical studies, comparing the depth of different markets, should be based on the whole price impact function instead of a simple ratio. To allow the market depth to depend on trade volume could open promising avenues for further theoretical research. This could lead to quite different trading strategies as in traditional models. --

    Methodology of measuring performance in alternative investment

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    The development of alternative investment has highlighted the limitations of standard performance measures like the Sharpe ratio, primarily because alternative strategies yield returns distributions which can be far from gaussian. In this paper, we propose a new framework in which trades, portfolios or strategies of various types can be analysed regardless of assumptions on payoff. The proposed class of measures is derived from natural and simple properties of the asset allocation. We establish representation results which allow us to describe our set of measures and involve the log-Laplace transform of the asset distribution. These measures include as particular cases the squared Sharpe ratio, Stutzer's rank ordering index and Hodges' Generalised Sharpe Ratio. Any measure is shown to be proportional to the squared Sharpe ratio for gaussian distributions. For non gaussian distributions, asymmetry and fat tails are taken into account. More precisely, the risk preferences are separated into gaussian and non-gaussian risk aversions.Alternative investment, performance measure, additive independence condition, generalised Sharpe ratio, portfolio optimization.

    Market Depth and Order Size - An Analysis of Permanent Price Effects of DAX Futures' Trades

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    In this paper we empirically analyze the permanent price impact of trades by investigating the relation between unexpected net order flow and price changes. We use intraday data on German index futures. Our analysis based on a neural network model suggests that the assumption of a linear impact of orders on prices (which is often used in theoretical papers) is highly questionable. Therefore, empirical studies, comparing the depth of different markets, should be based on the whole price impact function instead of a simple ratio. To allow the market depth to depend on trade volume could open promising avenues for further theoretical research. This could lead to quite different trading strategies as in traditional models

    Revising SA-CCR

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    From SA-CCR to RSA-CCR: making SA-CCR self-consistent and appropriately risk-sensitive by cashflow decomposition in a 3-Factor Gaussian Market ModelComment: 20 pages, 13 table

    Intraday Patterns in the Cross-section of Stock Returns

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    Motivated by the literature on investment flows and optimal trading, we examine intraday predictability in the cross-section of stock returns. We find a striking pattern of return continuation at half-hour intervals that are exact multiples of a trading day, and this effect lasts for at least 40 trading days. Volume, order imbalance, volatility, and bid-ask spreads exhibit similar patterns, but do not explain the return patterns. We also show that short-term return reversal is driven by temporary liquidity imbalances lasting less than an hour and bid-ask bounce. Timing trades can reduce execution costs by the equivalent of the effective spread
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