- Finance - Research Publications
Finance - Research Publications
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ItemAssessing the information content of short-selling metrics using daily disclosuresComerton-Forde, C ; Binh, HD ; Gray, P ; Manton, T (Elsevier, 2016-03-01)As a consequence of the 2008 financial crisis, the Australian regulator mandated daily reporting and disclosure of both short flow and short interest at an individual stock level. This provides a unique opportunity to study the nature and source of information embedded in each metric. Our empirical findings are consistent with short sellers being heterogeneous with respect to their information. Short flow is strongly related to recent returns and buy-order imbalance, and both anticipates and reacts to price-relevant announcements. In contrast, short interest is related to the mispricing of firm fundamentals. The distinct differences in the nature of information embedded in the two metrics provide an economic rationale for both the unique ability of each metric to predict returns and the future horizons over which the information is relevant.
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ItemNo Preview AvailableStock price manipulation: Prevalence and determinantsComerton-Forde, CA ; Putnins, TJ (Oxford University Press, 2014)We empirically analyze the prevalence and economic underpinnings of closing price manipulation and its detection. We estimate that ∼1% of closing prices are manipulated, of which only a small fraction is detected and prosecuted. We find that stocks with high levels of information asymmetry and mid to low levels of liquidity are most likely to be manipulated. A significant proportion of manipulation occurs on month/quarter-end days. Manipulation on these days is more likely in stocks with high levels of institutional ownership. Government regulatory budget has a strong effect on both manipulation and detection.
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ItemNo Preview AvailableIs Australia HFT-friendly?Comerton-Forde, C (Financial Services Institute of Australasia, 2012)Stephen Satchell’s paper ‘An assessment of the social desirability of high-frequency trading’, in this issue of JASSA examines the costs and benefits, and highlights some empirical evidence on the impact of HFT on market quality and welfare. Building on Satchell’s paper, this paper provides a perspective on HFT in the Australian market and identifies the factors influencing its attractiveness to HFT players. It also compares the US and Australian markets in terms of these factors to indicate the growth prospects for HFT activity in Australia.
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ItemShorting at close range: a tale of two typesComerton-Forde, C ; Jones, CM ; Putnins, TJ (Elsevier, 2016)We examine returns, order flow, and market conditions in the minutes before, during, and after NYSE and Nasdaq short sales. We find two distinct types of short sales: those that provide liquidity, and those that demand it. Liquidity-supplying shorts are strongly contrarian at intraday horizons. They trade when spreads are unusually wide, facing greater adverse selection. Liquidity-demanding shorts trade when spreads are narrow and tend to follow short-term price declines. These results support a competitive rational expectations model where both market-makers and informed traders short, indicating that these two shorting types are integral to both price discovery and liquidity provision.
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ItemDark trading and price discoveryComerton-Forde, C ; Putnins, TJ (ELSEVIER SCIENCE SA, 2015-10)