The impact of Predictable Trades on IVOL, Liquidity Risk, and Liquidity Commonality

Autor: Sean Sehyun Yoo, Seok Joong Kim, Haim Kedar-Levy
Rok vydání: 2021
Předmět:
Zdroj: SSRN Electronic Journal.
ISSN: 1556-5068
DOI: 10.2139/ssrn.3907313
Popis: We develop two investment strategy measures by investor type and explore their predictive capability on idiosyncratic volatility, liquidity risk and liquidity commonality. The measures indicate whether each of our nine investor types persistently implements a “positive-feedback” or a “contrarian” investment strategy in a given stock on a given month. Granger-causality reveals that the positive-feedback measure increases and the contrarian measure reduces the following month's idiosyncratic volatility. Liquidity risk is driven by the positive-feedback trades of foreigners and local institutions. Local individuals’ contrarian trades Granger-cause liquidity commonality. We conclude that persistent trading strategies are important demand-side predictors of those market attributes.
Databáze: OpenAIRE