Quantifying immediate price impact of trades based on the kk-shell decomposition of stock trading networks

Traders in a stock market exchange stock shares and form a stock trading network. Trades at different positions of the stock trading network may contain different information. We construct stock trading networks based on the limit order book data and classify traders into $k$ classes using the $k$-shell decomposition method. We investigate the influences of trading behaviors on the price impact by comparing a closed national market (A-shares) with an international market (B-shares), individuals and institutions, partially filled and filled trades, buyer-initiated and seller-initiated trades, and trades at different positions of a trading network. Institutional traders professionally use some trading strategies to reduce the price impact and individuals at the same positions in the trading network have a higher price impact than institutions. We also find that trades in the core have higher price impacts than those in the peripheral shell.Comment: 6 pages including 3 figures and 1 tabl

‘No Net Loss’ - Instrument Choice in Wetlands Protection

While not a high priority issue for most people, the public has long recognized the general importance of wetlands. Since President George H.W. Bush\u27s campaign in 1988, successive administration have pledged to ensure there would be no net loss of wetlands. Despite these continuous presidential pledges to protect wetlands, in recent decades, as more and more people have moved to coastal and waterside properties, the economic benefits from developing wetlands (and political pressures on obstacles to development) have significantly increased. Seeking to mediate the conflict between no net loss of wetlands and development pressures, the U.S. Environmental Protection Agency (EPA) and Army Corps of Engineers (Corps) have employed a range of policy instruments to slow and reverse wetlands conversion. Through the 1970s and 1980s, the EPA and the Corps relied on prescriptive regulation that discouraged development of wetlands and, even if a permit for wetland filling were granted, required on-site mitigation of destroyed wetlands to ensure no net loss. To defuse the growing political pressure for substantial change to this 404 Permit process for developing wetlands, however, since the 1990s the agencies and state governments have promoted a market mechanism that seeks to ensure wetlands conservation at minimum economic and political cost. This instrument is known as wetlands mitigation banking (WMB). In WMB, a bank of wetlands habitat is created, restored, or preserved and then made available to developers of wetlands habitat who must buy habitat mitigation as a condition of government approval for development. This mechanism has also provided a model for endangered species protection and is in the process of being extended to other settings including watershed protection. Given the shift in emphasis from prescriptive regulation to trading, the government\u27s longstanding pursuit of no net loss of wetlands provides a particularly useful case study for comparing the use of regulatory and market instruments for environmental protection. Indeed, WMB provides a rare example of robust trading outside the air pollution context and the trading habitat-based goods raises very different concerns than seen in trading mobile pollutants. Examining the evolution of WMB also forces us to think carefully over how to assess the success of a trading program. The traditional measure would likely be efficiency. But one must also consider effectiveness. In this regards, WMB poses two different types of failures - failure of instrument design (a front-end problem) and failure of implementation through monitoring and enforcement (a back-end problem). As many of the case studies in this book illustrate, performance of WMB depends critically both on institutional design and implementation. Another important measure of success concerns distributional equity. Who wins and who loses from banking? Such concerns are far more difficult to assess as good or bad policy in habitat trading than the traditional hot spots of pollutant trading programs. The chapter ends by drawing out key lessons for market-based approaches to watershed protection

Scaling in the distribution of intertrade durations of Chinese stocks

The distribution of intertrade durations, defined as the waiting times between two consecutive transactions, is investigated based upon the limit order book data of 23 liquid Chinese stocks listed on the Shenzhen Stock Exchange in the whole year 2003. A scaling pattern is observed in the distributions of intertrade durations, where the empirical density functions of the normalized intertrade durations of all 23 stocks collapse onto a single curve. The scaling pattern is also observed in the intertrade duration distributions for filled and partially filled trades and in the conditional distributions. The ensemble distributions for all stocks are modeled by the Weibull and the Tsallis $q$-exponential distributions. Maximum likelihood estimation shows that the Weibull distribution outperforms the $q$-exponential for not-too-large intertrade durations which account for more than 98.5% of the data. Alternatively, nonlinear least-squares estimation selects the $q$-exponential as a better model, in which the optimization is conducted on the distance between empirical and theoretical values of the logarithmic probability densities. The distribution of intertrade durations is Weibull followed by a power-law tail with an asymptotic tail exponent close to 3.Comment: 16 elsart pages including 3 eps figure

Financial Advisors: A Case of Babysitters?

We use two data sets, one from a large brokerage and another from a major bank, to ask: (i) whether financial advisors tend to be matched with poorer, uninformed investors or with richer, experienced but presumably busy investors; (ii) how advised accounts actually perform relative to self-managed accounts; (iii) whether the contribution of independent and bank advisors is similar. We find that advised accounts offer on average lower net returns and inferior risk-return tradeoffs (Sharpe ratios). Trading costs contribute to outcomes, as advised accounts feature higher turnover, consistent with commissions being the main source of advisor income. Results are robust to controlling for investor and local area characteristics. The results apply with stronger force to bank advisors than to independent financial advisors, consistent with greater limitations on bank advisory services.Financial advice, portfolio choice, household finance

Modelling Adverse Selection on Electronic Order-Driven Markets

The vast majority of models that decompose the bid/ask spread assume the quote-driven, specialist structure of the NYSE. This paper critically evaluates these models to construct a model specific for an electronic order-driven exchange. The model not only captures adverse selection and the impact of order flows on price discovery but it includes the imbalance of supply and demand inherent in the public limit order book. With this new model we investigate the change to anonymity on the Australian Securities Exchange (ASX). Following the change to anonymity, both adverse selection and the demand/supply imbalance have an increased impact on prices while order flow has a decreased influence, suggesting the change to anonymity has improved market efficiency. The model also uncovers a change in traders’ behavior once their fear of front-running is reduced. We show that the model is stable and robust across high liquidity stocks as well as stocks with as few as 5 trades per day.bid-ask spread models; adverse selection; anonymity

Construction, conformity and control : the taming of the Daily Herald 1921-30

The period from 1921 to 1930 saw the Daily Herald come under the direct control of the organised Labour movement - jointly owned by the Labour Party and the Trades Union Congress. It seperates an earlier incarnation of independent left radicalism from a subsequent identity as a commercial daily tied to an official political line. It is a period of commercial and competitive failure - the 500,000 circulation constantly evoked as a target was only attained in times of exceptional political or industrial excitement. Reliant on movement subsidies for capital finance it was unable to match the new features and inducements - notably insurance schemes - that competitors provided in a period of rapid expansion and intense circulation battles. Editorially it was torn between the radicalism of its staff, the journalistic instinct to avoid predictability and the desire of Labour's moderate leaders for an automatically reliable supporter in the national press. As leadership pressures mounted it increasingly became the voice of the centre lecturing followers, with debate restricted - but independent instincts were never totally curbed. Failure to attract the desired mass readership cannot be wholly attributed to poverty. Initially developed as the voice of a committed, informed radical political elite it continued to reflect their interests - and would always choose to educate rather than entertain. In the absence of a mass counterculture this left it seeking a popular readership with a serious approach. Realisation that a different approach was needed to win such a readership combined with recognition that this would need capital investment beyond the means of the movement to force the partnership formed with Odhams Press in 1929, ending exclusive movement control