Abstract
The COVID-19 pandemic and the subsequent lockdown brought about an exogenous and unparalleled stock market crash. The crisis thus provides a unique opportunity to test theories of ...environmental and social (ES) policies. This paper shows that stocks with higher ES ratings have significantly higher returns, lower return volatility, and higher operating profit margins during the first quarter of 2020. ES firms with higher advertising expenditures experience higher stock returns, and stocks held by more ES-oriented investors experience less return volatility during the crash. This paper highlights the importance of customer and investor loyalty to the resiliency of ES stocks. (JEL G12, G32, M14)
Received: June 3, 2020; editorial decision June 24, 2020 by Editor Andrew Ellul.
Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
Do ETFs Increase Volatility? BEN-DAVID, ITZHAK; FRANZONI, FRANCESCO; MOUSSAWI, RABIH
The Journal of finance (New York),
December 2018, Letnik:
73, Številka:
6
Journal Article
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Odprti dostop
Due to their low trading costs, exchange-traded funds (ETFs) are a potential catalyst for short-horizon liquidity traders. The liquidity shocks can propagate to the under-lying securities through the ...arbitrage channel, and ETFs may increase the nonfundamental volatility of the securities in their baskets. We exploit exogenous changes in index membership and find that stocks with higher ETF ownership display significantly higher volatility. ETF ownership increases the negative autocorrelation in stock prices. The increase in volatility appears to introduce undiversifiable risk in prices because stocks with high ETF ownership earn a significant risk premium of up to 56 basis points monthly.
Attention to Global Warming Choi, Darwin; Gao, Zhenyu; Jiang, Wenxi
The Review of financial studies,
03/2020, Letnik:
33, Številka:
3
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We find that people revise their beliefs about climate change upward when experiencing warmer than usual temperatures in their area. Using international data, we show that attention to climate ...change, as proxied by Google search volume, increases when the local temperature is abnormally high. In financial markets, stocks of carbon-intensive firms underperform firms with low carbon emissions in abnormally warm weather. Retail investors (not institutional investors) sell carbon-intensive firms in such weather, and return patterns are unlikely to be driven by changes in fundamentals. Our study sheds light on peoples’ collective beliefs and actions about global warming.
The article shows that two measures of the amount of private information in stock price-price nonsynchronicity and probability of informed trading (PIN)-have a strong positive effect on the ...sensitivity of corporate investment to stock price. Moreover, the effect is robust to the inclusion of controls for managerial information and for other information-related variables. The results suggest that firm managers learn from the private information in stock price about their own firms' fundamentals and incorporate this information in the corporate investment decisions. We relate our findings to an alternative explanation for the investment-to-price sensitivity, namely that it is generated by capital constraints, and show that both the learning channel and the alternative channel contribute to this sensitivity.
REMIT: ten years and counting Hiemstra, Liebrich M
Law and Financial Markets Review,
12/2020, Letnik:
14, Številka:
4
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Trading in energy derivatives is subjected to a fragmented regulatory framework which is largely designed for capital markets. Since 2011, a tailor made regime for the energy sector is in place; ...REMIT. Market participants need to find their way in this diverse set of obligations and prohibitions. This article describes the regulatory paradigm to which market participants need to adhere and the practical impact on trading in energy derivatives. Data reporting obligations, position limits and the prohibition on insider trading, market manipulation and the disclosure of inside information are discussed in more detail. The article concludes that REMIT fills in a regulatory gap, but its existence is not necessarily inevitable to capture energy derivative trading under a supervisory regime which is adapted to the specifics of energy markets.
We examine stock exchange trading rules for market manipulation, insider trading, and broker–agency conflict, across countries and over time, in 42 stock exchanges around the world. Some stock ...exchanges have extremely detailed rules that explicitly prohibit specific manipulative practices, but others use less precise and broadly framed rules. We create new indices for market manipulation, insider trading, and broker–agency conflict based on the specific provisions in the trading rules of each stock exchange. We show that differences in exchange trading rules, over time and across markets, significantly affect liquidity.
Insider trading patterns Biggerstaff, Lee; Cicero, David; Wintoki, M. Babajide
Journal of corporate finance (Amsterdam, Netherlands),
October 2020, 2020-10-00, Letnik:
64
Journal Article
Recenzirano
We revisit the information content of stock trading by corporate insiders with an expectation that opportunistic insiders will spread their trades over longer periods of time when they have a ...longer-lived informational advantage, and trade in a short window of time when their advantage is fleeting. Controlling for the duration of insiders' trading strategies, we find robust new evidence that both insiders' sales and purchases predict abnormal stock returns. In addition, we provide evidence that insiders attempt to preserve their informational advantages and increase their trading profits by disclosing their trades after the market has closed. When insiders report their trades after business hours, they are more likely to engage in longer series of trades, they trade more shares overall, and their trades are associated with larger abnormal returns. Finally, we show how accounting for these trading patterns sharpens screens for corporate insiders who trade on infor- mation.
•Corporate insiders trade in short windows of time when their informational advantage is fleeting.•Corporate insiders trade over extended periods when they have a long-lasting informational advantage•By controlling for insiders' trading patterns, we find that both their sales and purchases predict abnormal returns•When corporate insiders trade opportunistically, they report trades after hours to preserve their informational advantage•One can devise better screens for informed insider trading by controlling for these trading patterns
Liquidity suppliers lean against the wind. We analyze whether high-frequency traders (HFTs) lean against large institutional orders that execute through a series of child orders. The alternative is ...HFTs trading with the wind, that is, in the same direction. We find that HFTs initially lean against these orders but eventually change direction and take positions in the same direction for the most informed institutional orders. Our empirical findings are consistent with investors trading strategically on their information. When deciding trade intensity, they seem to trade off higher speculative profits against higher risk of being detected and preyed on by HFTs.
We examine whether and how product market competition affects insider trading profitability. We empirically show that the insiders of firms in highly competitive industries make higher abnormal ...profits. Our identification strategy includes both a quasi-natural experiment setting and an instrumental variable approach to address endogeneity concerns. We also run an extensive array of robustness checks and find that our baseline results remain substantially unchanged. Our cross-sectional analyses show that insider trading profitability is more pronounced for firms with: a higher level of trade secrecy, a higher level of R&D, a lower level of management voluntary disclosures, less readable 10-K reports and highly tone-ambiguous financial disclosures. We also find that our results are robust to the inclusion of corporate governance mechanisms. Overall, this study is consistent with the theoretical predictions that support the information asymmetry and proprietary cost channels of competition and that increases in competition lead insiders to undertake more rent-seeking activity.
•Firm insiders in more competitive industries make higher abnormal profits.•Insider profitability is more pronounced for firms with higher proprietary cost.•Competition leads insiders to exploit information advantage for rent-seeking.
We propose a new, price-based measure of information risk called abnormal idiosyncratic volatility (AIV) that captures information asymmetry faced by uninformed investors. AIV is the idiosyncratic ...volatility prior to information events in excess of normal levels. Using earnings announcements as information events, we show that AIV is positively associated with informed return run-ups, abnormal insider trading, short selling, and institutional trading during pre-earnings-announcement periods. We find that stocks with high AIV earn economically and statistically larger future returns than stocks with low AIV. Taken together, our findings support the notion that information risk is priced.
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