When “no” means “no”: The information content of ASX price queries
A long-term study of defendant firms in shareholder class action lawsuits
In the US, shareholders can form a class action to sue a company under S10b-5 of the Securities Exchange Act for allegedly releasing misleading information, or for failing to disclose material information. The substantial cost of litigation, and its associated impact on shareholder value, has prompted debate over whether to reform access to the shareholder class action mechanism. However, the debate is as yet unguided by any study of the long-term financial impact on firms involved in litigation.
Analysis of LAGIC & Solvency II’s Impact on Life Insurers
Solvency II is a European Union (EU) legislative program that introduces a harmonised insurance regulatory regime across the region. The program is one of the first insurance regulations in the world to follow the Basel Accord approach, with a 3-pillar structure that covers capital requirements, risk management and disclosure requirements. In Australia, the Life and General Insurance Capital (LAGIC) regime, which governs life and general insurers, follows a similar approach. In common with Solvency II, LAGIC adopts a risk-based approach for insurers, aimed at tailoring insurers’ capital requirements to their actual risk exposure. This is because the insurance industry is widely considered to be of systemic importance to the financial sector of the economy. This study focuses on Pillar 1, which deals with the capital requirements of the insurance regulations.
Pricing and Hedging of Guaranteed Minimum Benefits in Variable Annuities
The shift from defined benefit to defined contribution superannuation schemes within developed countries has correspondingly increased the importance of retirement savings and investment plans. Variable annuities (VAs) with guaranteed minimum benefits (GMBs) are gaining in popularity as products that can meet the demands of the ageing population. However, guaranteeing policyholders a minimum level of return exposes insurance providers to equity risk.
Limit Order Placement by High-Frequency Traders
The recent high profile court cases in the U.S., UK and China on high frequency trading (HFT) have further elevated the concerns about HFT. In particular, a core issue in the ongoing debate is the impact of HFT on market liquidity.
Dr Hui Zheng (USYD) and Prof. Avanidhar Subrahmanyam (UCLA ) Summary Paper 17-02-16
Exchange Trading Rules, Surveillance and Insider Trading
Are rules and their enforcement effective at mitigating insider trading? A study shows that rules and surveillance together have the potential to mitigate the perpetration of market manipulation but also to exacerbate the profits from such manipulative activities.
Professor Douglas Cumming, Feng Zhan, Professor Michael Aitken Summary Full Article 19-03-15
How does Dark Trading affect Price Discovery?
Price discovery (as an element of market efficiency) is one of the cornerstones of market quality the other being market fairness.
Drew Harris Summary 23-01-15
Spain, Ireland and the Euro crisis
The impact of the GFC in Europe has been, or perhaps remains, arguably more severe than the Great Depression in terms of breadth, depth and persistence.
Miles Waring Summary 15-12-14
Using superannuation to purchase the family home
Housing affordability in Australia has been in decline for more than two decades. Over the same period, the value of superannuation assets has risen strongly.
Yolanda Li SummaryView paper 15-12-14
Can discretion predict director returns?
Directors execute trades in their companies’ shares for a variety of reasons. Their actions may have information value for other investors seeking to mimic these strategies.
Sean Hardy SummaryView Paper 15-12-14
Ownership concentration, industrial competition and information asymmetry
Managers and major shareholders typically have an information advantage over outside investors when trading a company’s shares.
Ethan Wang Summary 15-12-14
Hedging and immunization of longevity risk
Increasing life expectancy rates are extending the liability profiles of annuity income providers. However, the challenge of devising asset allocation strategies to fund these liabilities is complicated by a lack of appropriate assets.
Estelle Liu Summary 15-12-14
Is there an optimal closing price mechanism?
Concerns regarding the prevalence of manipulation of closing prices have prompted substantial changes to the mechanisms used to close trading at stock exchanges around the world.
Nicholas Cordi, Sean Foley Summary 15-12-14
Gaming in futures market suggests model could be improved?
Evidence from UK interest rate futures market reveals that traders have been “drowning” the market with oversized orders, increasing their allocation under a pure pro-rata matching algorithm.
Sean Foley Summary 14-11-14
Equity Issues and the Impact of Lead Manager Affiliation on Broker Market Share and Trading Volume
Seasoned equity offerings (SEOs) are widely regarded as one of the most important capital structure events for listed companies. CMCRC researchers show brokers affiliated with SEO managers gain additional market share during SEOs as compared to unaffiliated brokers.
Jimmy Liu Summary Full Article 31-10-14
Tick Size debate and Algorithmic Trading
A new study by CMCRC researchers suggests that companies may be able to influence the level of algorithmic trading (AT) by adjusting their price level.
Tony Zhang Summary Full Article 08-08-14
What Drives Investment-Cash Flow Sensitivity around the World?
Motivated by ongoing debates on investment-cash flow sensitivity (ICFS), its relation to firm-level financial constraints and its documented decline in the U.S., we investigate the determinants of cross-country and time-series variation in ICFS.
Fariborz Moshirian,Vikram Nanda,Alexander Vadilyev,Bohui Zhang Full Article 20-05-14
Algorithmic trading using short interest as the primary trading signal
A new study by CMCRC researchers James Melouney and Dr. Matthew Clifton report that a trading strategy based on short-selling information can be used to develop several stock portfolios, achieving annual returns ranging from 0.2118% to 6.3015% after transaction costs.
James Melouney Summary 01-05-14
Opening auctions and their sequence does it matter?
CMCRC research reports the efficiency of opening prices is associated with the stock- specific open-auction sequence on the ASX. The sequential nature of the Australian opening auction implies that some stocks always open before other.
Yang (Kevin) Sun, Petko Kalev, Huu Nhan Duong, Erik Theissen Summary Full Article 21-04-14
Does portfolio emulation outperform its target funds?
An emulation fund collects trade signals from a sponsor’s multi-manager portfolio (e.g. a superannuation fund that hires a number of underlying active managers to make trading decisions) and rebalances on a lagged basis to match its holdings.
Zhe Chen, F Douglas Foster, David R Gallagher, Adrian D Lee Summary Full Article 02-12-13
Does HFT Exacerbate End-of-Day (EOD) Price dislocation?
Our paper is among the first to provide an empirical assessment as to whether High Frequency Trading (HFT) has a positive effect on market fairness.
Douglas Cumming, Feng Zhan, Michael Aitken Summary News Release Full Article 06-11-13
How much does an Illegal Insider Trade?
Our research shows that the volume traded by insiders is positively linked to the value of their insider information and negatively related to the likely penalty they will receive if detected by market regulators.
Frino A, Satchell S, Wong B, Zheng H Summary Full Article 09-10-13
Investor Behaviour and Lottery Stocks
There are certain stocks with similar characteristics to lottery tickets, though with a very small chance of winning and a negative average return, why would any investor choose to purchase such “lottery stocks”?
Grace Gong Summary Press Release Full Article 01-10-13
Style factor timing: An application to the portfolio holdings of US fund managers
A new study investigates whether an investment strategy which rotates between different investment styles based on macroeconomic signals adds economic value using stock and fund level data.
David R Gallagher, Peter A Gardner, Camille H Schmidt Summary Full Article 18-09-13