...Hedge Fund Creation and Management Project Technical Strategy on Momentum Stocks Introduction to Fund Philosophy Carhart’s Four Factor Model Our fund’s main strategy was based on exploiting value from momentum that can be uncovered in securities with positive momentum. We used the Cahart four factor model, based on the fama french model that assumes efficient market theories, to find out if an underlying securities carries the power of momentum. In the fama-french model, the return of a security is explained by 3 factors: market returns, sizes of firm and book values of firm : However, the model was unable to predict some market anomalies and a student of Fama’s found that adding a momentum factor helped to better predict these anomalies. While a momentum factor helps to explain the returns observed in the market, it also implies that markets are not efficient in any form. If that’s the case, then it should be possible to generate returns with a technical trading strategy on stocks that are significantly correlated with the momentum factor. Strategy Implementation Stock Screening We chose the firms within the Dow Jones Industrial 30 as our stock universe and traded all securities that are significantly correlated with the Fama-French Carhart Momentum Factor. The Dow 30 consists of high quality, highly liquid large cap stocks. Their liquidity characteristic increases the likelihood that “herding” will be observed and reduces the impact of entering...
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...markets. The empirical results provide direct evidence of the gradual information diffusion model in Hong and Stein (1999). Consistent with their theory, we show that a successful identification of stocks’ information diffusion stage helps explain momentum profits. We are able to enhance momentum profits by longing winner stocks with higher growth (and shorting loser stocks with larger drop) in call options implied volatility. Our empirical strategy generates a risk-adjusted alpha of 1.8% per month for a hedged winner-minus-loser portfolio over the 1996–2011 period, during which the simple momentum strategy fails to perform. The results are stronger and clearer if we use call options compared with put options, which are consistent with managers’ tendency to reveal good news and hide bad news. Our results are robust to transaction costs, choice of options’ moneyness, elimination of implied volatility persistence, and choice of options’ time-to-maturity. Finally, our results are not driven by existing stock-level characteristics, such as size, trading volume, and analyst coverage. JEL Classification: G10, G11, G12, G13 Keywords: Momentum, Implied Volatility PBC School of Finance, Tsinghua University. Email: chenzh@pbcsf.tsinghua.edu.cn. Tel: +86-1062781370. † Department of Finance, University of Melbourne. Email: andrea.lu@unimelb.edu.au. Tel: +61-449566225. For helpful comments and discussions, the authors thank Torben Andersen, Snehal Banerjee, Zhi Da, Stephen Figlewski, Kathleen...
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...managers have shown a keen interest in earning excess returns through different trading strategies. There has been a long debate whether financial markets are efficient or not, especially in the Indian context. If markets are efficient, there will not arise any arbitrage opportunities to take advantage of mispricing of securities. This paper intends to find out whether is it possible to earn excess returns in the Indian market by using any trading strategy and if it is possible, then which strategy is better. We take 30 companies out of 50 belonging to CNX Nifty and through data from Jan’2000-July’2014; we try to find whether one can earn excess returns from the market in the long run. We use Capital Asset Pricing Model (CAPM) to test for excess returns. The variable of our interest is the alpha or the intercept term while applying regression as stated under the CAPM model. For this, we take the return on the CNX Nifty Index as return on the market and the yield on 91-Day T-Bills as a proxy for the risk free rate. Our results show that the alpha is significant and we are able to generate excess return of 1.47% through momentum strategy and excess return of 0.74% through contrarian strategy. This also shows that momentum strategy is better in the long run than contrarian strategy in the context of Indian market. References Antoniou A.; Lam, H.Y.T; Paudyal, K.(2007). Profitability of momentum strategies in international markets: The role of business cycle variables and behavioral...
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...Current insider trading law is a theoretical mess. Legal experts have described it as seriously flawed, ill-defined, inconsistent, dysfunctional, and an enigma. A recent paper posits a new theory of insider trading which may provide some coherence what is now a dog’s breakfast. For those in investment research, any improved clarity would be a godsend. Sung Hui Kim, a law professor at UCLA, released a paper last month titled “Insider Trading as Private Corruption” which argues that insider trading should be based on a corruption standard rather than the current standard of common law fraud. Kim posits a new definition of insider trading: “use of an entrusted position for self-regarding gain.” In her view, insider trading is a form of private corruption, analogous to public corruption. Current confusion In the paper, Kim applies the new standard to existing insider trading cases, including controversial cases which exemplify regulatory overreach. In SEC v. Dorozhko, for example, the SEC argued that a hacker’s infiltration of a company’s server and his subsequent trading on the extracted financial information violated federal insider trading law. However, based on precedent, the hacker would not be liable for insider trading because insider trading generally requires the breach of a fiduciary duty. Nevertheless, the Second Circuit Court of Appeals held that liability could be found—even without a breach of fiduciary duty—as long as the defendant “affirmatively misrepresented...
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...business activities are affecting the climate negatively. In order to minimize the negative effects of climate change, the activities of the businesses should be controlled and encouraged to perform in a socially responsible manner. The article focuses on the responsibilities and the responses of businesses on climate change issues. The article first highlights on two prominent issues: Corporate Social Responsibility and Corporate Environmental Responsibility. Then the article introduces climate change as an international environmental concern. Then, by going through several published literature, the article highlights various responsibilities of business towards climate change issues. The article also highlights the several strategies the businesses are following to respond to the climate change issues. Any business is a social unit. It is said that business and society have a symbiotic relationship. On one hand, businesses help society by creating employment and providing better products or services to the people of the society and thus...
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...The Establishment of Emissions Trading Climate change is becoming an increasingly pertinent issue in Saskatchewan and can largely be attributed to high concentrations of greenhouse gas emissions. The province of Saskatchewan is especially vulnerable to a fluctuating climate given the dependence of its economy on the agriculture industry; therefore, an effective policy mechanism must be implemented as soon as possible in order to mitigate future harm. One third of Saskatchewan’s greenhouse gas emissions are produced by oil and gas extraction and refining, and by mining (1). The next leading producers of greenhouse gas emissions are the energy generation sector, the transport sector, and the agriculture sector. Coal and gas are the two main sources of energy production in Saskatchewan and are both responsible for a large portion of the province’s total emissions (1). Technological innovation is required in order to make alternative, less polluting sources of energy efficient enough to further develop. Saskatchewan’s economic dependence on the sectors that are largely responsible for its greenhouse gas pollution is the most sensible explanation as to why addressing the problem has proven to be such an arduous task. This paper will discuss the environmental risk associated with high concentrations of greenhouse gas and whether or not the establishment of emissions trading in Saskatchewan is a worthwhile pursuit for policy-makers as they attempt to address the pressures that are...
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...THE COMPLETE GUIDE TO DAY TRADING A Practical Manual From A Professional Day Trading Coach Markus Heitkoetter BookSurge, LLC North Charleston, SC The opinions expressed in this manuscript are solely the opinions of the author and do not represent the opinions or thoughts of the publisher. The author represents and warrants that s/he either owns or has the legal right to publish all material in this book. The Complete Guide to Day Trading A Practical Manual From A Professional Day Trading Coach All Rights Reserved. Copyright © 2008 Markus Heitkoetter V2.0 Edited by Nicole Quinlan This book may not be reproduced, transmitted, or stored in whole or in part by any means, including graphic, electronic, or mechanical without the express written consent of the publisher except in the case of brief quotations embodied in critical articles and reviews. BookSurge, LLC http://www.booksurge.com ISBN: 978-1-4196-9563-6 PRINTED IN THE UNITED STATES OF AMERICA To my family for supporting me even in my craziest moments. Table of Contents PREFACE ........................................................................................................ IX INTRODUCTION: WHY DAY TRADING? ....................................................... XIII HOW TO GET THE MOST OUT OF THIS BOOK .............................................. XIX PART 1: DAY TRADING BASICS – WHAT YOU SHOULD KNOW .......1 WHAT IS DAY TRADING?.................................................................
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...High-Frequency Trading Peter Gomber, Björn Arndt, Marco Lutat, Tim Uhle Chair of Business Administration, especially e-Finance E-Finance Lab Prof. Dr. Peter Gomber Campus Westend • RuW P.O. Box 69 • D-60629 Frankfurt/Main Commissioned by Executive Summary High-frequency trading (HFT) has recently drawn massive public attention fuelled by the U.S. May 6, 2010 flash crash and the tremendous increases in trading volumes of HFT strategies. Indisputably, HFT is an important factor in markets that are driven by sophisticated technology on all layers of the trading value chain. However, discussions on this topic often lack sufficient and precise information. A remarkable gap between the results of academic research on HFT and its perceived impact on markets in the public, media and regulatory discussions can be observed. The research at hand aims to provide up-to-date background information on HFT. This includes definitions, drivers, strategies, academic research and current regulatory discussions. It analyzes HFT and thus contributes to the ongoing discussions by evaluating certain proposed regulatory measures, trying to offer new perspectives and deliver solution proposals. Our main results are: HFT is a technical means to implement established trading strategies. HFT is not a trading strategy as such but applies the latest technological advances in market access, market data access and order routing to maximize the returns of established trading strategies. Therefore,...
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...High-Frequency Trading Remi Charpin MBA student BADM 580 June 28, 2010 Prepared for Professor Charles Alvis Financial Markets Seminar Table of Contents List of Illustrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Problem Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Background Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Discussion of Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Key Players . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Pros. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....
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...Review 4 Types of Equity Markets 4 Dark Pool 5 News 5 HFT High frequency trading – grown to account for 20-30% of the volume on the exchanges. Low – latency hardware strategically placed as close as possible to exchange data centers. HFT – defined by trading where speed matters. Subset of HFT by TMX program – ELP (electronic liquidity provider) Today, typical high frequency systems are interpreting and reacting to market data in microseconds. High Frequency Group | Specific Strategy | Market making | *passive rebate arbitrage, exchanges provide incentives to liquidity providers by paying for passive order flowHigh frequency trading strategies that involves placing an order to sell (or offer) or buy a limit order (or bid) in order to earn a bid-ask spread. | | Ticker tape trading – by observing flow of quotes, high frequency machines are able to extract information that has not yet crossed the news screens. Since all quote and volume information is public, fully complaint with regulatory laws | Latency Arbitrage | Interlisted arbitrage – strategy that attempts to buy and sell the same security btw. domiciles. Eg. buying Potash corp in Canada and selling it in the U.S.Intra-listed arbitrage – strategy that attempts to buy and sell the same security btw. domestic marketplaces. Eg. Buying POT on BATS and selling it on NYSE | Information Arbitrage | Index arbitrage – strategy that attempts to profit from mispricing btw. the various forms of a tradable index...
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...Macquarie University Master of Applied Finance ------------------------------------------------- Emissions Trading ------------------------------------------------- Assignment 2 ------------------------------------------------- Onesteel Prepared by: Wayne Andrews Student number: 41712986 September 2011 Subject Number : ECFS905 Lecturer : Julian Turecek Class : Sydney P. T. Company Selection Select an ASX200 company that is expected to have a carbon exposure equal to or greater than 2% of EBITDA at a $23/t carbon price. Question 1 Determine the company’s carbon exposure, including direct (Scope 1) and indirect (Scope 2) emissions and establish that its exposure is greater than 2%. The following table summarises Onesteel’s actual and estimated for FY10, FY11 and FY12 emissions and imputed carbon cost under the currently proposed Carbon Tax, relative to reported EBITDA. Table 1 – Implied impact of carbon pricing imputed to 2010 results | Company Guidance | Fixed Price imputed for comparison | Fiscal year commencing | FY10 | FY10 | FY11 | FY12 | Carbon Price (FY10/11 theoretical) | 23.0 | 23.0 | 23.0 | 23.0 | EITE Assistance Rate | 94.5% | 94.5% | 94.5% | 94.5% | EBIT DA $Mil | 619.0 | 619.0 | 638.0 | 717.6 | Type 1 Emissions | 2.55 | 2.55 | 2.66 | 3.05 | Type 2 Emissions | 1.34 | 1.34 | 1...
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...1.1 Origin of the Report As part of the term paper of Evening Masters of Business Administration (EMBA) course requirement, we are assigned the topic “Carbon Accounting” by our course teacher for accomplishing our report. 1.2 Objectives of the report ➢ To attain the skill of report writing. ➢ To achieve deep knowledge about Carbon Accounting. ➢ To fulfill the partial requirement of our course of Accounting for Managers. 1.3 Methodology of the report This study was a descriptive research where we have been analyzed mainly secondary data to understand the Carbon Accounting and its application. All the data has gathered for report writing during term. Information collected to furnish this report is mainly from secondary in nature such as related books, journals, periodicals and Websites etc. 1.4 Limitations of the report We have tried our level best to find out the opportunity of work for overcoming the limitation but due to shortage of time, official compulsion and lack of availability of required data it was not possible to collect huge information about the topic. Other limitation is our report is mostly text based. 1.5 What is Carbon Accounting? Carbon accounting refers generally to processes undertaken to "measure" amounts of carbon dioxide equivalents emitted by an entity. It is used by nation states, corporations and individuals. It is the process of measuring, monitoring, benchmarking and reporting an organization Greenhouse Gas Emissions in a defined...
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... Commission Sharing Arrangements, EMS/OMS Relationships, Fragmentation of Liquidity, MiFID II and Transaction Cost Analysis and Best Execution. The ATMonitor team would like to thank all members and experts that have generously contributed to the success of MyATMonitor. ATMonitor Team. www.atmonitor.co.uk 2 Fragmentation of Liquidity ATMonitor Commentary Experts Panellists (in the order of appearance): Steve Grob Director of Group Strategy, Fidessa Steve is responsible for Fidessa’s strategic development.This includes the development of new geographic markets and strategic partnerships and driving new industry initiatives. As part of this Steve heads up the firm’s strategy in response to the fragmentation of the equities trading landscape, managing the firm’s initiatives in conjunction with both the established exchanges and the new and emerging alternative liquidity venues and dark pools. Steve has also played a significant part in bringing the Fidessa Fragmentation Index (FFI) and the Fragulator® to the wider trading community. He provides a regular commentary on the issues...
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...TRADING PLAN TEMPLATE C o p y r i g h t © Tim Wilcox 2005 Disclaimer All reasonable steps and due diligence have been taken in preparing this document. However, it may contain ideas that are not appropriate to you or your style of trading, so do your own research and draw your own conclusions. By itself, this document will not enhance your trading performance, nor will it prevent you from incurring losses. Any losses that are incurred are the sole responsibility of each trader. Under no circumstances will I, trade2win or the contributors to the thread entitled ‘A Trading Plan – You MUST Have One!’ accept any liability for loss. TRADING PLAN TEMPLATE ©TIM WILCOX 2005 CONTENTS Introduction Page 3 TRADING PLAN OVERVIEW 1. What is a Trading Plan? 2. Who Needs a Trading Plan? 3. What Will a Trading Plan Do? 4. Before You Start . . . Page 4 Page 4 Page 5 Page 6 TRADING PLAN TEMPLATE 5. Know Yourself, Know Your Purpose 6. Trading Goals 7. Markets, Instruments & Timeframes 8. Tools of the Trade 9. Before the Market Opens . . . 10. Risk & Money Management 11. Exit Strategy 12. Trade Strategies, Setups & Entries 13. After the Market Closes . . . 14. Discipline! 15. Golden Trading Rules Page 9 Page 11 Page 12 Page 13 Page 14 Page 16 Page 21 Page 23 Page 24 Page 25 Page 26 TRADING PLAN EXAMPLES 16. Roll Up, Roll Up . . . Page 29 ‘PLAN THE TRADE - TRADE THE PLAN’ PAGE 2 OF 29 TRADING PLAN TEMPLATE ©TIM WILCOX 2005 Introduction ...
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...GUIDE TO DAY TRADING A Practical Manual From A Professional Day Trading Coach Markus Heitkoetter The opinions expressed in this manuscript are solely the opinions of the author and do not represent the opinions or thoughts of the publisher. The author represents and warrants that s/he either owns or has the legal right to publish all material in this book. The Complete Guide to Day Trading A Practical Manual From A Professional Day Trading Coach All Rights Reserved. Copyright © 2008 Markus Heitkoetter V1.0 Edited by Nicole Quinlan This book may not be reproduced, transmitted, or stored in whole or in part by any means, including graphic, electronic, or mechanical without the express written consent of the publisher except in the case of brief quotations embodied in critical articles and reviews. ISBN: 978-1-4196-9563-6 PRINTED IN THE UNITED STATES OF AMERICA To my family for supporting me even in my craziest moments. Table of Contents PREFACE......................................................................................................... VIII INTRODUCTION : WHY DAY TRADING?................................................................... XI HOW TO GET THE MOST OUT OF THIS BOOK..................................................... XVII PART 1: DAY TRADING BASICS – WHAT YOU SHOULD KNOW ......................... 1 WHAT IS DAY TRADING?....................................................................................... 2 WHO SHOULD BE DAY TRADING?................
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