Search results

This study examines the stock market efficiency in China to offer trading strategy guidance to investors and efficiency evaluation insight to policymakers.

This study examines the stock market efficiency in China with a new combined liquidity trading strategy by blending technical analysis into a liquidity buy-and-hold strategy.

Our results show that the combined strategy generates significant excess returns in the whole sample period, suggesting that the Chinese stock market is not consistent with the weak form efficient hypothesis. In addition, the combined strategy yields more significant risk-adjusted excess returns after the 2004 split-share reform, indicating the stock market efficiency in China does not exhibit a distinct upgrade after the reform. Our further test results reinforce the main conclusions after taking transaction costs, market states, short-selling reform and other issues into consideration.

Our study contributes to the literature in two ways: First, we shed light on the mixed documented results about the market efficiency form in China. Second, we contribute to the mixed relation between the 2004 split-share reform and market efficiency in China.

An effective corporate governance system helps to smoothly run business operations and manage financial matters. To ensure that management behavior is ethical, and their decisions are in the best interest of shareholders, corporate governance plays a vital role. This study aims to examine the impact of corporate governance on the insider trading profitability of listed banks in Pakistan, Bangladesh and India.

The authors take data from the financial statements of 70 listed banks and stock exchanges of the respective countries. The period of the data for our study is from 2010 to 2020. The authors use board independence, the board size, institutional ownership and managerial ownership as measures of corporate governance characteristics. While inside trading profitability is measured with abnormal returns. The authors apply the fixed effect panel regression for hypothesis testing and the two-step dynamic panel system-generalized method of moments (GMM) regression technique for checking the robustness of the findings.

The authors found that corporate governance has a significant impact on insider trading profitability in Pakistan, Bangladesh and India. Board independence and institutional ownership are negatively related while board size and managerial ownership are positively associated with insider trading profitability.

To the best of our knowledge, this study is the first one to explore the role of corporate governance in limiting insider trading on South Asian banks. It recommends that corporations should follow the code of corporate governance for the protection of shareholders' and other investors' profits.

This paper adds to the scant literature on the tightening of regulations and its impact on the profitability of insider trades by examining the effects of the recent enactment of the Securities Market Amendment Act 2002 in New Zealand. We investigate the abnormal returns around the date of insider transactions both before and after the introduction of this Act. We find that the number of insider transactions decreased just prior to the introduction of the Act; further we observe a marked reduction in the profitability of directors. However, the difference between the pre and post-change returns lacks statistical significance.

The purpose of this paper is to examine the impact of female board membership on the profitability of corporate insider purchases.

The authors use a classic event study approach. They measure abnormal returns around the insider purchase events, and analyze the cross-sectional variation of this market impact in terms of female board membership, controlling for a range of other factors.

The authors find a strong positive market reaction in the aggregated data, and after decomposing transactions according to gender, they find that the profitability of female directors is statistically indistinguishable from their male counterparts. Additionally, they find evidence that with more females sitting on the board, the profitability of the male directors decreases but the profitability of their female counterparts does not.

The authors’ findings suggest that having females on the board increases corporate governance of male directors. The results also suggest that female directors are no less inclined to exploit the asymmetric information advantage provided by board membership.

Filter trading is a technical trading rule that has been used extensively to test the efficient market hypothesis in the context of long-term trading. In this paper, the authors adopt the rule to analyze intraday trading, in which an open position is not left overnight. This paper aims to explore the relationship between intraday filter trading profitability and intraday realized volatilities. The bivariate thin plate spline (TPS) model is chosen to fit the predictor-response surface for high frequency data from the Hang Seng index futures (HSIF) market. The hypotheses follow the adaptive market hypothesis, arguing that intraday filter trading differs in profitability under different market conditions as measured by realized volatility, and furthermore, the optimal filter size for trading on each day is related to the realized volatility. The empirical results furnish new evidence that range-based realized volatilities (RaV) are more efficient in identifying trading profit than return-based volatilities (ReV). These results shed light on the efficiency of intraday high frequency trading in the HSIF market. Some trading suggestions are given based on the findings.

Among all the factors that affect the profit of filter trading, intraday realized volatility stands out as an important predictor. The authors explore several intraday volatilities measures using range-based or return-based methods of estimation. The authors then study how the filter trading profit will depend on realized volatility and how the optimal filter size is related to the realized volatility. The bivariate TPS model is used to model the predictor-response relationship.

The empirical results show that range-based realized volatility has a higher predictive power on filter rule trading profit than the return-based realized volatility.

First, the authors contribute to the literature by investigating the profitability of the filter trading rule on high frequency tick-by-tick data of HSIF market. Second, the authors test the assumption that the magnitude of the intraday momentum trading profit depends on the realized volatilities and aims to identify a relationship between them. Furthermore, the authors consider several intraday realized volatilities and find the RaV have the higher prediction power than ReV. Finally, the authors find some relationship between the optimal filter size and the realized volatilities. Based on the observations, the authors also give some trading suggestions to the intraday filter traders.

The purpose of this paper is to evaluate the profitability of technical trading relative to buy-and-hold (BH) strategy at firm level, controlling for firm size and trading volume.

This paper applies variable-length moving averages (VMAs) thoroughly to each and every stock listed on Taiwan Stock Exchange (TWSE) and computes the excess returns of technical trading relative to BH strategy. The samples are further grouped by firm size and trading volume. Furthermore, possible data snooping bias is investigated by employing Hansen’s (2005) Superior Predictive Ability tests.

The result shows that VMAs outperform the BH strategy. The profitability of VMAs, remarkably, is positively associated with size and trading volume. After correcting for data snooping bias, VMAs with longer moving averages outperform VMAs with shorter moving averages. The evidence suggests that size and volume information is accountable for trend projection.

Unlike past studies simply applying technical trading rules to market indices, portfolios, or selected stocks, this paper evaluates the profitability of technical trading by applying VMAs comprehensively to each and every individual stock listed on TWSE controlling for the effect of firm size and trading volume, providing more practical insights for trading individual stocks.

The purpose of this paper is to compare the profitability of different pairs selection and spread trading methods using the complete data set of commodity futures from Dalian Commodity Exchange, Shanghai Futures Exchange and Zhengzhou Commodity Exchange.

Paris trading methods that are proposed in the literature are compared in terms of the risk-adjusted returns visa in-sample and out-of-sample backtesting and bootstrapping for robustness.

The empirical results show that pairs trading in the Chinese commodity futures market offers high returns, whereas, the profitability of these strategies primarily depends on the identification of suitable pairs. The observed high returns are a compensation for the spread divergence risk during the potentially longer holding periods, which implies that the maximum drawdown is more crucial compared to other risk-adjusted return measures such as the Sharpe ratio.

Complementary to the existing literature, for the Chinese commodity futures market, it is shown that if shorter maximum holding periods are introduced for the spread positions, then the pairs trading profits decreases. Therefore, the returns do not necessarily imply market inefficiency when the higher maximum drawdown associated with the holding period of the spread position is taken into account.

In this paper we conduct tests for two different trading rules, namely, the Dual Moving Average (DMA) model and the Channel Breakout (CHB) rule. These rules are tested across five futures contracts – the S&P 500, British Pound, US T‐Bonds, COMEX Gold and Corn using daily data over the period 1990 to 1998. Overwhelmingly, we find that the trading rules are unable to produce (gross or net) profits at any statistical level. While positive gross and net profits were available in four of the five markets, the profits were neither economically or statistically significant.

The purpose of this paper is to examine the profitability from various simple trading range break-out rules on the NASDAQ index.

Runs test is used to test whether the returns from every other days on buy and sell days are random. If they are not random, then the Student T-test will not be applicable to test the predictive power for profitability from the simple trading range break-out rules on the NASDAQ index.

Empirical study in this paper shows that the returns on buy and sell days are not random via runs test. Therefore, the simple trading range break-out rules cannot lead to the conclusion that they have the predictive power for profitability from the T-test. Applying the simple trading range break-out rule to NASDAQ does not support or overturn the market efficiency hypothesis.

The study is only based on the five simple trading range break-out rules from 9,311 daily closing prices on the NASDAQ over the period of February 5, 1971 to December 12, 2007. It can serve as a counter example for other studies about the predictive power of profitability from different trading rules.

Contrary to numerous previous research works, the study shows that the simple trading range break-out rules have no predictive power for profitability, and should not be used to test the market efficiency.

Based on the literature review, the study is one of the first empirical studies showing the returns on buy and sell days are not independent, and the authors cannot conclude that the trading range break-out rules have the predictive power for profitability on the NASDAQ index.

The authors examine whether the stronger information content of chief financial officer (CFO) insider trading relative to that of chief executive officers (CEOs) results from a different willingness to exploit the information asymmetry that exists between executives and outside shareholders (scrutiny hypothesis) or from differing financial acumen between CFOs and CEOs (financial acumen hypothesis). The authors consider the information content of equity purchases for CEOs and CFOs. The paper aims to discuss these issues.

The authors examine purchase-based insider trading portfolio returns before and after the implementation of SOX in firms with high versus low regulation, for routine and opportunistic managers, and in samples of CEOs with prior CFO experience.

The authors provide evidence that SOX affected executives differently and provide support for the scrutiny hypothesis. CFO-based portfolios remain the most profitable post-SOX, but the magnitude of returns has fallen in absolute and relative terms compared to returns for CEOs. Superior financial acumen of CFOs does not appear to be supported. CEO purchase trade returns appear to be lower than CFO returns because CEOs face greater visibility and scrutiny and thus limit their own trading aggressiveness.

This research contributes to the literature in explaining why CFOs best CEOs in their insider trading purchases and documents that in the post-SOX period, CFO insider trading superiority disappears.