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Essays on trading behavior of profes...

Cai, Fang.

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Essays on trading behavior of professional investors.

Record Type:	Language materials, printed : Monograph/item
Title/Author:	Essays on trading behavior of professional investors./
Author:	Cai, Fang.
Description:	99 p.
Notes:	Chair: Gautam Kaul.
Contained By:	Dissertation Abstracts International63-07A.
Subject:	Economics, Finance. -
Online resource:	http://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=3057907
ISBN:	0493733019

Essays on trading behavior of professional investors.
Cai, Fang.

Essays on trading behavior of professional investors. - 99 p.

Chair: Gautam Kaul.

Thesis (Ph.D.)--University of Michigan, 2002.

Professional investors are often assumed to be well-informed investors. However, it is still debatable whether their trading strategies indeed reflect superior information and to what extent they can make superior returns. This dissertation includes two essays addressing these questions from different perspectives.

ISBN: 0493733019Subjects--Topical Terms:

626650
Economics, Finance.

Essays on trading behavior of professional investors.
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005 20110512
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020 $a 0493733019
035 $a (UnM)AAI3057907
035 $a AAI3057907
040 $a UnM $c UnM
100 1 $a Cai, Fang. $3 1017149
245 1 0 $a Essays on trading behavior of professional investors.
300 $a 99 p.
500 $a Chair: Gautam Kaul.
500 $a Source: Dissertation Abstracts International, Volume: 63-07, Section: A, page: 2640.
502 $a Thesis (Ph.D.)--University of Michigan, 2002.
520 $a Professional investors are often assumed to be well-informed investors. However, it is still debatable whether their trading strategies indeed reflect superior information and to what extent they can make superior returns. This dissertation includes two essays addressing these questions from different perspectives.
520 $a The first essay examines market makers' trading behavior in the T-bond futures market when Long-Term Capital Management (LTCM) faced financial constraints during its 1998 crisis. I find strong evidence that market makers on aggregate engaged in front running, i.e., they traded on their own accounts in the same direction as LTCM did, but just <italic>one or two minutes</italic> beforehand. Moreover, the front running against LTCM was about four times as severe as that against other customers. I also find that, before the bailout orchestrated by the Federal Reserve, a market maker's cumulative abnormal profit was positively correlated to her tie with LTCM's clearing firm Bear Stearns and the intensity of her front running, but this relation turned negative after the bailout. The overall evidence suggests that market makers did attempt to exploit their information advantage, however their trades based on non-fundamental information was not persistently profitable. The bailout effectively relaxed LTCM's constraints and negated the profitability of front running.
520 $a The second essay investigates the relationship between institutional trading and stock returns, and reveals some distinct patterns in the trading activities of institutions and the returns of stocks they buy/sell. There is strong evidence that returns Granger-cause institutional trading, especially purchases, but not vice versa. This significant causality can be largely explained by the time-series variation of <italic>market</italic> returns. Moreover, stocks with heavy institutional buying (selling) experience positive (negative) momentum over the previous 12 months, and the pattern in returns is mimicked almost perfect1y by the trading of institutions. The most intriguing finding however is that excess returns disappear immediately after the intense institutional trading. Finally, the aggregate return and trading patterns are mainly driven by mutual funds and investment advisors. This study shows that institutional investors as a whole group engage in positive feedback trading, and their trades cannot predict future returns.
590 $a School code: 0127.
650 4 $a Economics, Finance. $3 626650
690 $a 0508
710 2 0 $a University of Michigan. $3 777416
773 0 $t Dissertation Abstracts International $g 63-07A.
790 $a 0127
790 1 0 $a Kaul, Gautam, $e advisor
791 $a Ph.D.
792 $a 2002
856 4 0 $u http://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=3057907