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Please use this identifier to cite or link to this item:
http://hdl.handle.net/1783.1/6019
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| Title: | Market predictability and non-informational trading |
| Authors: | Hendershott, Terrence
Seasholes, Mark S. |
| Keywords: | Return predictability
Liquidity
Comovement |
| Issue Date: | 11-Mar-2009 |
| Citation: | Hendershott, Terrence; Seasholes, Mark S. (Dec 2008). Market Predictability and Non-Informational Trading. The 2008 HKUST Finance Symposium, 16-17 December 2008. The Hong Kong University of Science and Technology, Hong Kong, China |
| Abstract: | This paper studies the ability of non-informational order imbalances (buy minus sell volume) to predict daily stock returns at the market level. Using a model with three types of participants (an informed trader, liquidity traders, and a finite number of arbitrageurs), we derive predictions relating returns to lagged returns and lagged order imbalances. Empirical tests using New York Stock Exchange non-informational basket/portfolio trading data provide results consistent with adverse selection at the market-level, but no evidence of limited risk-bearing capacity. Finally, we establish that these market-wide non-informational order imbalances also affect individual stock return comovement by examining additions to the S&P500 Index. |
| URI: | http://hdl.handle.net/1783.1/6019 |
| Appears in Collections: | FINA Conference Papers
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Files in This Item:
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Description |
Size | Format |
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| MarketPredictability20090311.pdf | | 320Kb | Adobe PDF | View/Open |
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