1.

Use of past prices to infer private information:

Author: David P. Brown, Robert H. Jennings
Published On: 15th January 2011
Technical analysis, or the use of past prices to infer private information, has value in a model
in which prices are not fully revealing and traders have rational conjectures about the relation
between prices and signals. A two-period dynamic model of equilibrium is used to
demonstrate that rational investors use historical prices in forming their demands and to
illustrate the sensitivity of the value of technical analysis to changes in the values of the
exogenous parameters.

2. Expected returns as latent variables:

Author: Nathaniel Light, Denys Maslow, Oleg Rytchkov
Published On: 20th September 2001
A new approach for estimating expected returns on individual stocks from a large number of
firm characteristics. We treat expected returns as latent variables and apply the partial least
squares (PLS) estimator that filters them out from the characteristics under an assumption
that the characteristics are linked to expected returns through one or few common latent
factors. The estimates of expected returns constructed by our approach from 26 firm
characteristics generate a wide cross-sectional dispersion of realized returns and outperform
estimates obtained by alternative techniques. Our results also provide evidence of
commonality in asset pricing anomalies.

3. The Dynamics of Market Efficiency:

Author: Dominik M. Rosh, Avandia Subramanian, Mathijs A. van Dijk
Published On: 4th October 1997
We study the dynamics of high-frequency market efficiency measures. We provide evidence
that these measures common across stocks and with each other, suggesting the existence of a
systematic market efficiency component. In vector auto regressions, we show that shocks to
funding liquidity (the TED spread), hedge fund assets under management, and a proxy for
algorithmic trading are significantly associated with systematic market efficiency. Thus, stock
market efficiency is prone to systematic fluctuations, and, consistent with recent theories,
events and policies that impact funding liquidity can affect the aggregate degree of price
efficiency.

4. Insider Trading Laws and Stock Price Informativeness :

Author: Nuno Fernandes, Miguel A. Ferreira
Published On: 25th May 2015
The relation between a countrys first-time enforcement of insider trading laws
and stock price informativeness using data from 48 countries over 19802003.
Enforcement of insider trading laws improves price informativeness, as measured
by firm-specific stock return variation, but this increase is concentrated in
developed markets. In emerging market countries, price informativeness
changes insignificantly after the enforcement, as the important contribution of
insiders in impounding information into stock prices largely disappears. The
enforcement does not achieve the goal of improving price informativeness in
countries with poor legal institutions. It does turn some private information into
public information, thereby reducing the cost of equity in emerging markets.

5. Noise Trading Affects Markets: An Experimental Analysis

Author: Robert Bloomfield, Maureen OHara, Gideon Saar
Published On: 04 June 2015
We use a laboratory market to investigate the behavior of traders who lack
informational advantages and have no exogenous reason to trade. We find that
these uninformed traders behave largely as irrational contrarian noise traders,
trading against recent price movements to their own detriment. The uninformed
traders provide some benefits to the market: increasing market volume and
depth, while reducing bid-ask spreads and the temporary price impact of trades.
However, their noise trading also diminishes the ability of market prices to adjust
to new information. A securities transaction tax reduces uninformed trader
activity, but it reduces informed trader activity by approximately the same
amount; as a result, the tax does not alter the impact of noise trading on the
informational efficiency of the market.
6. A Further Analysis of the LeadLag Relationship Between the
Cash Market and Stock Index Futures Market
Author: Kalok Chan
Published On: 29th july 2007
The intraday leadlag relation between returns of the Major Market cash index and returns of
the Major Market Index futures and S&P 500 futures is investigated. Empirical results show
strong evidence that the futures leads the cash index and weak evidence that the cash index
leads the futures. The asymmetric leadlag relation holds between the futures and all
component stocks, including those that trade in almost every five-minute interval. Evidence
indicates that when more stocks move together (market-wide information) the futures leads
the cash index to a greater degree. This suggests that the futures market is the main source of
market-wide information

7. Empirical Characteristics of Dynamic Trading Strategies: The Case of

Hedge Funds:
Author: William Fung, David A. Hsieh
Published On: 04 June 2015
Article presents some new results on an unexplored dataset on hedge fund performance. The
results indicate that hedge funds follow strategies that are dramatically different from mutual
funds, and support the claim that these strategies are highly dynamic. The article finds five
dominant investment styles in hedge funds, which when added to Sharpes (1992) asset class
factor model can provide an integrated framework for style analysis of both buy-and-hold and
dynamic trading strategies.

8. Temporary Components of Stock Returns:

Author: Christopher G. Lamoureux, Guofu Zhou
Published On: 03 June 2015
Within the past few years several articles have suggested that returns on large
equity portfolios may contain a significant predictable component at horizons 3
to 6 years. Subsequently, the tests used in these analyses have been criticized
(appropriately) for having widely misunderstood size and power, rendering the
conclusions inappropriate. This criticism however has not focused on the data, it
addressed the properties of the tests. In this article we adopt a subjectivist
analysis treating the data as fixed to ascertain whether the data have
anything to say about the permanent/temporary decomposition. The data speak
clearly and they tell us that for all intents and purposes, stock prices follow a
random walk.
9. Market Making, Prices, and Quantity Limits:
Author: Dominique Dupont
Published On: 15th June 2015
This article develops a model of spread and depth setting under asymmetric
information where the equilibrium depth is proportionally more sensitive than the
spread to changes in the degree of information asymmetry. The analysis uses a
one-period model in which a risk-neutral, monopolistic market maker faces a
price-sensitive liquidity trader and a better informed trader who is alternatively
risk neutral and risk averse. The equilibrium depth can take values ranging from
0 to infinity, depending on the information asymmetry, the asset volatility, and
the strength of the liquidity demand, while the spread remains positive and
finite.

10. Learning from Trading :

Author: Shmuel Kandel, Aharon R. Ofer, Oded Sarig
Published On: 25th May 2015
The incorporation of diverse information into asset prices is empirically examined in an
actual securities market with multiple rounds of trade. Using prices of Israeli index and
nominal bonds of equal maturity, we calculate implied expectations of inflation that has
already occurred but for which the official statistic has not yet been announced. Learning is
defined as the convergence of these expectations to the actual level of inflation in the period
after the end of the month but before the announcement of the official statistic. We find that
the variance of the inflation expectation errors decreases with trading days in this period. The
decline in the variance suggests that investors learn, by repeatedly observing prices, about the
distribution of other investors information. We also find a positive relation between the
dispersion of relative price changes and the size of the inflationexpectation errors on the first
round of trade. The correlation diminishes as investors learn about the distribution of inflation
information in the economy.

11. Strategic Disclosure and Stock Returns: Theory and

Evidence from US Cross-Listing:
AUTHOR: Shingo Goto, Masahiro Watanabe, Yan Xu
Published On: 25th March 2015
When a firm exercises discretion to disclose or withhold information (strategic disclosure),
risk-averse investors command higher expected returns when expected cash flows decrease,
producing a negative correlation between these expectations. Moreover, stock returns exhibit
stronger reversal than they do when full disclosure is enforced. We propose a model that
makes these predictions and provide consistent evidence using a panel of foreign firms that
list American Depositary Receipts (ADRs). We find significant shifts in the time-series
properties of stock returns for firms that undergo large changes in disclosure environments,
such as those cross-listing on the NYSE/AMEX/NASDAQ and those from less-
developed/emerging markets and code-law countries.

12. Differences of Opinion Make a Horse Race :

AUTHOR: Milton Harris, Artur Raviv
Published On: 25th May 2015
A model of trading in speculative markets is developed based on differences of opinion
among traders. Our purpose is to explain some of the empirical regularities that have been
documented concerning the relationship between volume and price and the time-series
properties of price and volume. We assume that traders share common prior beliefs and
receive common information but differ in the way in which they interpret this information.
Some results are that absolute price changes and volume are positively correlated,
consecutive price changes exhibit negative serial correlation, and volume is positively auto
correlated.