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Trading aggressiveness and market efficiency
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Klein, Olga (2020) Trading aggressiveness and market efficiency. Journal of Financial Markets , 47 . 100515. doi:10.1016/j.finmar.2019.100515 ISSN 1386-4181.
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WRAP-Trading-aggressiveness-market-efficiency-Klein-2019.pdf - Accepted Version - Requires a PDF viewer. Available under License Creative Commons Attribution Non-commercial No Derivatives 4.0. Download (1074Kb) | Preview |
Official URL: https://doi.org/10.1016/j.finmar.2019.100515
Abstract
Stein (2009) shows that crowding by sophisticated traders can cause price overreaction. To test Stein's theory, in this paper I use trading aggressiveness after earnings releases as a measure of crowding. With a large number of traders, their strong aggregate demand makes trade execution more difficult, and leads every individual investor to trade more aggressively. I find that the prices of aggressively traded stocks overreact after good news, but not after bad news, except during the financial crisis. The asymmetry in observed results can be explained by differences in belief heterogeneity of investors and market attention during news releases.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > HG Finance H Social Sciences > HJ Public Finance |
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Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Stocks, Crowding out (Economics), Earnings per share | ||||||||
Journal or Publication Title: | Journal of Financial Markets | ||||||||
Publisher: | Elsevier BV | ||||||||
ISSN: | 1386-4181 | ||||||||
Official Date: | January 2020 | ||||||||
Dates: |
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Volume: | 47 | ||||||||
Article Number: | 100515 | ||||||||
DOI: | 10.1016/j.finmar.2019.100515 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Date of first compliant deposit: | 15 October 2019 | ||||||||
Date of first compliant Open Access: | 25 April 2021 | ||||||||
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