HKUST Library Institutional Repository Banner

HKUST Institutional Repository >
Finance >
FINA Conference Papers >

Please use this identifier to cite or link to this item: http://hdl.handle.net/1783.1/6019
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

Files in This Item:

File Description SizeFormat
MarketPredictability20090311.pdf320KbAdobe PDFView/Open

All items in this Repository are protected by copyright, with all rights reserved.