Browsing by Subject "Informed trading"
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Item Embargo Can investors’ informed trading predict cryptocurrency returns? Evidence from machine learning(Elsevier Inc., 2022-05-24) Wang, Y.; Wang, C.; Şensoy, Ahmet; Yao, S.; Cheng, F.As an emerging asset, cryptocurrencies have attracted more and more attention from investors and researchers in recent years. With the gradual convergence of the investors in cryptocurrency and traditional financial markets, the research on investor trading behavior from the perspective of microstructure has become increasingly important in cryptocurrency market. In this paper, we study whether investors’ informed trading behavior can significantly predict cryptocurrency returns. We use various machine learning algorithms to verify the contribution of informed trading to the predictability of cryptocurrency returns. The results show that informed trading plays a role in the prediction of some individual cryptocurrency returns, but it cannot significantly improve the prediction accuracy in an average sense of the whole market. The lack of market supervision of cryptocurrency market may be the main factor for relatively low efficiency of this market, and policymakers need to pay attention to it.Item Open Access Information cascades, short-selling constraints, and herding in equity markets(Elsevier, 2020-05) Tiniç, M.; Iqbal, Muhammad Sabeeh; Mahmud, S. F.This paper examines the relationship between informed trading and herding in Borsa_Istanbul. Our firm-level cross-sectional analysis assertsthat informed trading can significantly increase future herding levels. Furthermore, we show that the relationship between informed trading andherding intensifies under short-selling restrictions. Our results confirm the predictions of the informational cascades framework where the in-dividuals disregard their private information to follow others. We show that information cascades are relevant both for buy-side herding and sell-side herding. Short-selling restrictions may reinforce the herding behaviour since informed investors may not be able to clear out potential price misalignments.Item Open Access Information content of order imbalance in the index options market(Elsevier BV, 2021-12-12) Şensoy, Ahmet; Omole, JohnWe use proprietary transaction level data of Borsa Istanbul to compute the order imbalance of index options in order to investigate the linkages between option trades and spot index returns. Our findings show that weeks with higher call (put) order imbalance are associated with higher (lower) contemporaneous spot index returns. In addition, higher call order imbalance significantly predicts negative next-week index returns. The spot index return predictability by call options is absorbed neither by the stock order imbalance nor the index futures imbalance. Indeed, this predictability is consistent with the view that the hedging demand of counterparties in the option market that leads to the transfer of order imbalance from option market to stock market is the driver of predictability. Results are robust after controlling for various factors.Item Open Access Informed traders’ arrival in foreign exchange markets: Does geography matter?(Springer Verlag, 2015) Gençay, R.; Gradojevic, N.; Olsen, R.; Selçuk F.This article critically investigates the possibility that private information offering systematic profit opportunities exists in the spot foreign exchange market. Using a unique dataset with trader-specific limit and market order histories for more than 10,000 traders, we detect transaction behavior consistent with the informed trading hypothesis, where traders consistently make money. We then work within the theoretical framework of a high-frequency version of a structural microstructure trade model, which directly measures the market maker’s beliefs. Both the estimates of the trade model parameters and our model-free analysis of the data suggest that the time-varying pattern of the probability of informed trading is rooted in the strategic arrival of informed traders on a particular day-of-week, hour-of-day, or geographic location (market). © 2015, Springer-Verlag Berlin Heidelberg.Item Open Access Other people's money: A comparison of institutional investors(Elsevier, 2022-12) Eraslan, V.; Omole, John; Sensoy, Ahmet; Ozdamar, MelisaUsing unique equity ownership data, we investigate the stock picking preferences and return forecasting performances of institutional investors that manage their own money against those that manage others’. We reveal that these investors’ preferences significantly differ in historical patterns, liquidity and prudence when picking stocks. In particular, ‘own money managers’ display a risk-seeking behaviour whereas “others’ money managers” exhibit risk-averse characteristics. However, our results indicate that both types of investors are well informed, albeit own money managers excel in the short-term while others’ money managers are successful in the long-term.