Pub Date : 2025-09-01DOI: 10.1016/j.finmar.2025.100982
Corey Garriott , Vincent van Kervel , Marius Zoican
Limit order markets use a queuing system in which limit orders must wait in line to execute. We show that the queue position of a limit order influences its adverse selection risk and inhibits inventory risk management. Trade may worsen market maker risk sharing, unlike many protocols without queuing. We uncover a crowding-out effect: An inventory shock reduces liquidity provision by market makers later in the queue. Using futures data, we confirm both low risk sharing and the crowding-out effect. These two results imply a trade-off, as the queuing sequence that optimizes risk sharing decreases quoted depth up to 8.4%.
{"title":"Queuing and inventories in limit order markets","authors":"Corey Garriott , Vincent van Kervel , Marius Zoican","doi":"10.1016/j.finmar.2025.100982","DOIUrl":"10.1016/j.finmar.2025.100982","url":null,"abstract":"<div><div>Limit order markets use a queuing system in which limit orders must wait in line to execute. We show that the queue position of a limit order influences its adverse selection risk and inhibits inventory risk management. Trade may worsen market maker risk sharing, unlike many protocols without queuing. We uncover a crowding-out effect: An inventory shock reduces liquidity provision by market makers later in the queue. Using futures data, we confirm both low risk sharing and the crowding-out effect. These two results imply a trade-off, as the queuing sequence that optimizes risk sharing decreases quoted depth up to 8.4%.</div></div>","PeriodicalId":47899,"journal":{"name":"Journal of Financial Markets","volume":"75 ","pages":"Article 100982"},"PeriodicalIF":2.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145005057","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01DOI: 10.1016/j.finmar.2025.100984
Lu Qin , Don M. Autore , Danling Jiang , Hongquan Zhu
We examine the impact of staggered high-speed rail (HSR) connection events between city pairs in China on retail investor behavior and stock market equilibrium outcomes. We find that HSR introductions between investor-firm city pairs promote intercity retail block purchases and cross-city web searches, and increase return comovement among firms in connected cities. Enhanced city connectivity is associated with improved firm valuation, increased turnover, better liquidity, and reduced prevalence of large trades. These effects tend to be driven by connected city pairs with a distance below 1,500 km, for which HSR is faster than flying.
{"title":"Faster than flying: High-speed rail, investors, and firms","authors":"Lu Qin , Don M. Autore , Danling Jiang , Hongquan Zhu","doi":"10.1016/j.finmar.2025.100984","DOIUrl":"10.1016/j.finmar.2025.100984","url":null,"abstract":"<div><div>We examine the impact of staggered high-speed rail (HSR) connection events between city pairs in China on retail investor behavior and stock market equilibrium outcomes. We find that HSR introductions between investor-firm city pairs promote intercity retail block purchases and cross-city web searches, and increase return comovement among firms in connected cities. Enhanced city connectivity is associated with improved firm valuation, increased turnover, better liquidity, and reduced prevalence of large trades. These effects tend to be driven by connected city pairs with a distance below 1,500 km, for which HSR is faster than flying.</div></div>","PeriodicalId":47899,"journal":{"name":"Journal of Financial Markets","volume":"75 ","pages":"Article 100984"},"PeriodicalIF":2.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145005059","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01DOI: 10.1016/j.finmar.2025.100985
Youngmin Choi , Suzanne S. Lee
We focus on the fundamental role of security analysts as information intermediaries using recent advances in the realized variance literature. We construct a signal-to-noise volatility ratio to examine the heterogeneity in the efficiency contributions of analysts’ recommendations while controlling for the noise contained in price data. We find that only analysts’ revisions with greater efficiency contributions generate significant stock price reactions in the directions expected by the analysts. Furthermore, these revisions increase the degree of informed trading in the options market and reduce the uncertainty related to the covered firms.
{"title":"On the efficiency contributions of analyst recommendations to financial markets","authors":"Youngmin Choi , Suzanne S. Lee","doi":"10.1016/j.finmar.2025.100985","DOIUrl":"10.1016/j.finmar.2025.100985","url":null,"abstract":"<div><div>We focus on the fundamental role of security analysts as information intermediaries using recent advances in the realized variance literature. We construct a signal-to-noise volatility ratio to examine the heterogeneity in the efficiency contributions of analysts’ recommendations while controlling for the noise contained in price data. We find that only analysts’ revisions with greater efficiency contributions generate significant stock price reactions in the directions expected by the analysts. Furthermore, these revisions increase the degree of informed trading in the options market and reduce the uncertainty related to the covered firms.</div></div>","PeriodicalId":47899,"journal":{"name":"Journal of Financial Markets","volume":"75 ","pages":"Article 100985"},"PeriodicalIF":2.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145005061","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We construct two types of trading shocks and examine their effects on stock prices. Common shocks capture the shared trading activity across funds, whereas granular idiosyncratic shocks place emphasis on large players. Common shocks related to stock sales exhibit a significantly stronger price impact than those related to purchases, in contrast to symmetric effects of purchases and sales for granular idiosyncratic shocks. The initial price impact persists in the short run and partially reverses after six months, suggesting underreaction to institutional trading. Our results underscore the impact of the common component across various funds on asset prices and market efficiency.
{"title":"Institutional granular impact is benign on asset sales and price efficiency","authors":"Yinghua Fan , Guanhao Feng , Xiao Qiao , Sayad Baronyan","doi":"10.1016/j.finmar.2025.100987","DOIUrl":"10.1016/j.finmar.2025.100987","url":null,"abstract":"<div><div>We construct two types of trading shocks and examine their effects on stock prices. Common shocks capture the shared trading activity across funds, whereas granular idiosyncratic shocks place emphasis on large players. Common shocks related to stock sales exhibit a significantly stronger price impact than those related to purchases, in contrast to symmetric effects of purchases and sales for granular idiosyncratic shocks. The initial price impact persists in the short run and partially reverses after six months, suggesting underreaction to institutional trading. Our results underscore the impact of the common component across various funds on asset prices and market efficiency.</div></div>","PeriodicalId":47899,"journal":{"name":"Journal of Financial Markets","volume":"75 ","pages":"Article 100987"},"PeriodicalIF":2.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145005062","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01DOI: 10.1016/j.finmar.2025.100986
Terrence Hendershott , Marc Rysman , Rainer Schwabe
We study linkages between stock exchanges' proprietary data sales and trading activity by analyzing the introduction of a new data product, the New York Stock Exchange's Integrated Feed (NYSE IF). Consistent with trading and data being complements, firms that subscribed to the NYSE IF increased their share of trading on the NYSE. In principle, firms subscribing to the NYSE IF could impose a negative externality on non-subscribing firms due to increased information asymmetry. However, consistent with information purchases having a positive network externality due to increased liquidity, non-subscribing firms also increased their share of trading on the NYSE.
{"title":"Stock exchanges as platforms for data and trading","authors":"Terrence Hendershott , Marc Rysman , Rainer Schwabe","doi":"10.1016/j.finmar.2025.100986","DOIUrl":"10.1016/j.finmar.2025.100986","url":null,"abstract":"<div><div>We study linkages between stock exchanges' proprietary data sales and trading activity by analyzing the introduction of a new data product, the New York Stock Exchange's Integrated Feed (NYSE IF). Consistent with trading and data being complements, firms that subscribed to the NYSE IF increased their share of trading on the NYSE. In principle, firms subscribing to the NYSE IF could impose a negative externality on non-subscribing firms due to increased information asymmetry. However, consistent with information purchases having a positive network externality due to increased liquidity, non-subscribing firms also increased their share of trading on the NYSE.</div></div>","PeriodicalId":47899,"journal":{"name":"Journal of Financial Markets","volume":"75 ","pages":"Article 100986"},"PeriodicalIF":2.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145005058","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-06-01DOI: 10.1016/j.finmar.2025.100970
Ioanna Lachana, David Schröder
In light of changes in the media landscape from traditional print towards social media, in this study we compare the ability of investor sentiment measures obtained from various media sources to predict short-term market returns. We show that investor sentiment extracted from the social media platform Seeking Alpha is better in predicting market returns than investor sentiment obtained from the Wall Street Journal, a traditional print medium. Seeking Alpha is more suitable for the extraction of investor sentiment due to the richer language and timeliness of online media.
鉴于媒体格局从传统印刷到社交媒体的变化，在本研究中，我们比较了从各种媒体来源获得的投资者情绪指标预测短期市场回报的能力。我们表明，从社交媒体平台Seeking Alpha提取的投资者情绪比从传统印刷媒体《华尔街日报》（Wall Street Journal）获取的投资者情绪更能预测市场回报。网络媒体语言更丰富，时效性更强，因此Seeking Alpha更适合于投资者情绪的提取。
{"title":"Investor sentiment and stock returns: Wisdom of crowds or power of words? Evidence from Seeking Alpha and Wall Street Journal","authors":"Ioanna Lachana, David Schröder","doi":"10.1016/j.finmar.2025.100970","DOIUrl":"10.1016/j.finmar.2025.100970","url":null,"abstract":"<div><div>In light of changes in the media landscape from traditional print towards social media, in this study we compare the ability of investor sentiment measures obtained from various media sources to predict short-term market returns. We show that investor sentiment extracted from the social media platform Seeking Alpha is better in predicting market returns than investor sentiment obtained from the <em>Wall Street Journal</em>, a traditional print medium. Seeking Alpha is more suitable for the extraction of investor sentiment due to the richer language and timeliness of online media.</div></div>","PeriodicalId":47899,"journal":{"name":"Journal of Financial Markets","volume":"74 ","pages":"Article 100970"},"PeriodicalIF":2.1,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144223653","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-06-01DOI: 10.1016/j.finmar.2025.100971
Yashar H. Barardehi , Dan Bernhardt
When measured using trade-time aggregation, intraday patterns in trading activity remain -shaped, but estimates of volatility and Kyle’s lambda fall sharply from open to close. -shaped patterns in volatility and Kyle’s lambda found using commonly-used calendar-time aggregation reflect over-aggregation biases when trading activity is high as near the open and close. Indicative of imperfectly-competitive liquidity provision, trade-time aggregation also reveals that in active markets, expected trade imbalances are positively priced and unexpected trade imbalances are more strongly priced when they share the sign of expected imbalances, while in less active markets expected trade imbalances are negatively priced.
{"title":"Revisiting the ∪-shaped patterns in volatility and price impacts: Novel results using trade-time estimates","authors":"Yashar H. Barardehi , Dan Bernhardt","doi":"10.1016/j.finmar.2025.100971","DOIUrl":"10.1016/j.finmar.2025.100971","url":null,"abstract":"<div><div>When measured using trade-time aggregation, intraday patterns in trading activity remain <span><math><mo>∪</mo></math></span>-shaped, but estimates of volatility and Kyle’s lambda fall sharply from open to close. <span><math><mo>∪</mo></math></span>-shaped patterns in volatility and Kyle’s lambda found using commonly-used calendar-time aggregation reflect over-aggregation biases when trading activity is high as near the open and close. Indicative of imperfectly-competitive liquidity provision, trade-time aggregation also reveals that in active markets, expected trade imbalances are positively priced and unexpected trade imbalances are more strongly priced when they share the sign of expected imbalances, while in less active markets expected trade imbalances are negatively priced.</div></div>","PeriodicalId":47899,"journal":{"name":"Journal of Financial Markets","volume":"74 ","pages":"Article 100971"},"PeriodicalIF":2.1,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144223652","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-06-01DOI: 10.1016/j.finmar.2025.100981
Pietro Bonaldi , Mauricio Villamizar-Villegas
This study examines how inventory control and private information affect trading prices and volumes in a centralized interdealer foreign exchange (FX) market. Using exogenous variation from FX auctions conducted by the Colombian Central Bank (2008–2014), we analyze settlement data from the COP/USD spot market before and after each auction. Comparing dealers with differing inventory and information shocks, we find that those with reduced inventories increase net USD purchases and pay higher prices post-auction.
{"title":"Auction-based tests of inventory control and private information in a centralized interdealer FX market","authors":"Pietro Bonaldi , Mauricio Villamizar-Villegas","doi":"10.1016/j.finmar.2025.100981","DOIUrl":"10.1016/j.finmar.2025.100981","url":null,"abstract":"<div><div>This study examines how inventory control and private information affect trading prices and volumes in a centralized interdealer foreign exchange (FX) market. Using exogenous variation from FX auctions conducted by the Colombian Central Bank (2008–2014), we analyze settlement data from the COP/USD spot market before and after each auction. Comparing dealers with differing inventory and information shocks, we find that those with reduced inventories increase net USD purchases and pay higher prices post-auction.</div></div>","PeriodicalId":47899,"journal":{"name":"Journal of Financial Markets","volume":"74 ","pages":"Article 100981"},"PeriodicalIF":2.1,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144223650","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-06-01DOI: 10.1016/j.finmar.2025.100972
Xue-Zhong He , Junqing Kang
Speed competition incentivizes fast traders to trade earlier and temporally fragments the price discovery process. Large traders internalize their price impact and screen trading aggressiveness to resolve the pre-trading uncertainty proportional to the number of traders. Therefore, price discovery in the late period depends on the number of slow traders and the amount of fundamental uncertainty resolved by fast traders. A concentration of fast or slow traders harms price discovery in the late period, generating hump-shape overall price informativeness to speed competition. With fast information diffusion, speed competition harms the overall price informativeness, unless fast traders are high-frequency traders.
{"title":"Speed competition and strategic trading","authors":"Xue-Zhong He , Junqing Kang","doi":"10.1016/j.finmar.2025.100972","DOIUrl":"10.1016/j.finmar.2025.100972","url":null,"abstract":"<div><div>Speed competition incentivizes fast traders to trade earlier and temporally fragments the price discovery process. Large traders internalize their price impact and screen trading aggressiveness to resolve the pre-trading uncertainty proportional to the number of traders. Therefore, price discovery in the late period depends on the number of slow traders and the amount of fundamental uncertainty resolved by fast traders. A concentration of fast or slow traders harms price discovery in the late period, generating hump-shape overall price informativeness to speed competition. With fast information diffusion, speed competition harms the overall price informativeness, unless fast traders are high-frequency traders.</div></div>","PeriodicalId":47899,"journal":{"name":"Journal of Financial Markets","volume":"74 ","pages":"Article 100972"},"PeriodicalIF":2.1,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144223651","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-01DOI: 10.1016/j.finmar.2025.100961
Mitsuru Katagiri , Junnosuke Shino , Koji Takahashi
We investigate the effects of the Bank of Japan’s (BOJ’s) exchange-traded fund (ETF) purchase program on equity risk premia. Utilizing the cross-sectional variations in the amount of individual stock that the BOJ has indirectly purchased in the program, the empirical analysis reveals that: (i) the BOJ’s ETF purchases instantaneously support stock prices on purchase, and (ii) the positive effects on stock prices, combined with the countercyclical nature of the BOJ’s purchases, affect the market beta and coskewness of Japanese stocks, leading to an economically significant decline in risk premia.
{"title":"Bank of Japan’s ETF purchase program and equity risk premium: A CAPM interpretation","authors":"Mitsuru Katagiri , Junnosuke Shino , Koji Takahashi","doi":"10.1016/j.finmar.2025.100961","DOIUrl":"10.1016/j.finmar.2025.100961","url":null,"abstract":"<div><div>We investigate the effects of the Bank of Japan’s (BOJ’s) exchange-traded fund (ETF) purchase program on equity risk premia. Utilizing the cross-sectional variations in the amount of individual stock that the BOJ has indirectly purchased in the program, the empirical analysis reveals that: (i) the BOJ’s ETF purchases instantaneously support stock prices on purchase, and (ii) the positive effects on stock prices, combined with the countercyclical nature of the BOJ’s purchases, affect the market beta and coskewness of Japanese stocks, leading to an economically significant decline in risk premia.</div></div>","PeriodicalId":47899,"journal":{"name":"Journal of Financial Markets","volume":"73 ","pages":"Article 100961"},"PeriodicalIF":2.1,"publicationDate":"2025-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143593433","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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