From funding liquidity to market liquidity: Evidence from the index options market

10.26686/wgtn.12612788.v1 ◽

2020 ◽

Author(s):

Cheng Zhang ◽

Chunbo Liu ◽

Zhiping Zhou

Keyword(s):

Positive Relationship ◽

Equity Market ◽

Market Liquidity ◽

Options Market ◽

Market Uncertainty ◽

Short Term ◽

Index Options ◽

Funding Liquidity ◽

Daily Data ◽

The Relationship

This study examines the relationship between funding liquidity and market liquidity using daily data on the S&P 500 index options. We find that options market liquidity is positively correlated with funding liquidity after controlling for market uncertainty. Further analysis reveals that the positive relationship between funding liquidity and market liquidity in the options market is mainly driven by short‐term and deep out‐of‐the‐money options. Our results remain robust after controlling for the confounding effects of the equity market and different data frequencies.

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From funding liquidity to market liquidity: Evidence from the index options market

Journal of Futures Markets ◽

10.1002/fut.21920 ◽

2018 ◽

Vol 38 (10) ◽

pp. 1189-1205

Author(s):

Chunbo Liu ◽

Cheng Zhang ◽

Zhiping Zhou

Keyword(s):

Market Liquidity ◽

Options Market ◽

Index Options ◽

Funding Liquidity

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Determinants of Violations in the SET50 Index Options Pricing Relationships: Put-Call-Futures Parity and Box Spread Tests

Asian Social Science ◽

10.5539/ass.v14n3p1 ◽

2018 ◽

Vol 14 (3) ◽

pp. 1 ◽

Cited By ~ 1

Author(s):

Woradee Jongadsayakul

Keyword(s):

Transaction Costs ◽

Risk Premium ◽

Tobit Model ◽

Options Pricing ◽

Options Market ◽

Index Options ◽

Exercise Price ◽

Daily Data ◽

Before And After ◽

Contract Specification

Although SET50 Index Options, the only option product on Thailand Futures Exchange, has been traded since October 29, 2007, it has faced the liquidity problem. The SET50 Index Options market must offer a risk premium to compensate investors for liquidity risk. It may cause violations in options pricing relationships. This research therefore uses daily data from October 29, 2007 to December 30, 2016 to compare the violations in SET50 Index Options pricing relationships before and after change in contract specification on October 29, 2012 and investigate determinants of these violations using Tobit model. Two tests of SET50 Index Options pricing relationships, Put-Call-Futures Parity and Box Spread, are employed. The test results of Put-Call-Futures Parity show that the percentage and baht amount of violations in many cases are greater in the period before the modification of SET50 Index Options. Without transaction costs, we also see more Box Spread violations before contract adjustment. However, after taking transaction costs into account, there are more percentage and baht amount of Box Spread violations in the later time period. The estimation of Tobit model shows that the violation sizes of both Put-Call-Futures Parity and Box Spread, excluding transaction costs, depend on the liquidity of SET50 Index Options market measured by option moneyness and open interest. The SET50 Index Options contract specification, especially exercise price, also significantly affects the size of violations, though the direction of a relationship is not cleared.

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Liquidity Mismatch Index and Bank Performance

International Journal of Financial Research ◽

10.5430/ijfr.v12n5p277 ◽

2021 ◽

Vol 12 (5) ◽

pp. 277

Author(s):

Godfrey Marozva

Keyword(s):

South African ◽

Portfolio Management ◽

Market Liquidity ◽

Management Theory ◽

Bank Performance ◽

Unit Of Analysis ◽

Funding Liquidity ◽

Empirical Issue ◽

Liquidity Measures ◽

The Relationship

The relationship between liquidity and bank performance in finance literature remains an unresolved empirical issue. The main objective of this article was to investigate the relationship between liquidity mismatch index (LMI) initially developed by Brunnermeier, Gorton and Krishnamurthy (2012) and further developed by Bai, Krishnamurthy, and Weymuller (2018) and South African bank performance empirically. Different from other prior studies, the study undertook to determine the relationship employing the liquidity measure that integrates both market liquidity and funding liquidity within a context of asset liability mismatches. The unit of analysis was a panel of 12 South African banks over the period 2008–2018. Specifically, two liquidity measures – the bank liquidity mismatch index (BLMI) and the aggregate liquidity mismatch index (ALMI) were regressed against bank performance matrices. The newly developed liquidity measures are based on portfolio management theory and they account for the significance of liquidity spirals. Results revealed that, bank performance is negatively and significantly related with BLMI. While the bank performance is positively related to ALMI, the relationship is not significant. Also, the nature of relationship is dependent on the measure of profitability employed.

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International Real Estate Review

International Real Estate Review ◽

10.53383/100027 ◽

2001 ◽

Vol 4 (1) ◽

pp. 26-42

Author(s):

Simon Stevenson ◽

Keyword(s):

Real Estate ◽

Empirical Evidence ◽

Strong Evidence ◽

Positive Relationship ◽

International Markets ◽

Equity Market ◽

The Other ◽

Real Estate Securities ◽

The Relationship ◽

Minimal Evidence

This study re-examines the relationship between real estate securities and inflation in a total of ten international markets. In addition to the raw data, both the orthogonalized and hedged approaches were adopted in order to strip out the general impact of the domestic equity market. The results revealed that there is minimal evidence of a positive relationship between real estate securities and inflation, which is in line with existing empirical evidence. However, the strong evidence of perverse relationship, noted in previous studies of REITs, is not robust throughout the other nine markets. The hedged and orthogonalized data also provided minimal evidence in favour of a positive relationship, both in the short and long terms.

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Are herding transmissions in the gulf cooperation council stock markets regional or international?

Review of Behavioral Finance ◽

10.1108/rbf-06-2020-0137 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Dina Gabbori ◽

Basel Awartani ◽

Aktham I. Maghyereh ◽

Nader Virk

Keyword(s):

Cross Section ◽

Stock Markets ◽

Equity Market ◽

Short Term ◽

Absolute Deviation ◽

Content Type ◽

Market Return ◽

The Us ◽

The Cross ◽

The Relationship

PurposeThe authors aim to assess whether herding in GCC stock markets is more responsive to global dynamics than its response to regional developments. To do so, they use the largest equity market in the region which is Saudi Arabia as the benchmark, and then they examine if herding crosses from this large regional market to the rest of equities in the neighboring markets during various time periods. To compare the importance of global influences on herding, the authors investigate and compare the impact of the information flow from the US equity market on the herding of equities in the GCC markets.Design/methodology/approachTo investigate herding in GCC markets the authors use the relationship between the squared market return and the cross-section absolute deviation that does not covary with market styles and/or fundamentals. In order to do that we follow Galariotis et al. (2015) and account for four styles: market-oriented, small-cap, value and momentum. As these factors have been shown to be associated with the economic fundamentals, filtering the covariance of deviation with these factors is expected to remove the style and the fundamental herding influence from the value of the dispersion.FindingsThe results show significant herding behavior that persists across various independent periods. This evidence stands even when the authors control for the well- known factor structures in stock returns. Importantly, the authors find that the few herding crossovers that occurred during the sample period are more likely to originate from the Saudi market rather than from the US. Therefore, the authors conclude that behavioral inefficiencies in the GCC equity markets are likely to be regional and that the sentiment-based trading in the US has essentially a minimal role to play.Practical implicationsThe empirical findings are useful for policymakers who aim at preventing market manipulation in order to preserve the integrity of financial markets. Policymakers in the GCC should disclose more information to aid investors so they do not rely on other investors' trades. The portfolio managers should be aware that the correlation of GCC equities can be higher in the short term due to common market herding in these countries. As the US market does not play an important role in triggering behavioral irrationalities in these markets, investing in GCC equities is a good hedge in a US portfolio. Finally, the results have also important implications for active funds that aim to exploit short-term trending in markets in order to enhance performance.Originality/valueThe authors’ contribution in this paper is to investigate herding in GCC markets by using the relationship between the squared market return and the cross-section absolute deviation that does not covary with market styles and/or fundamentals. Another contribution of our paper is to investigate any cross herding from the Saudi market to the rest of the markets in the area. The previous literature on GCC equity market herding is silent on this issue and it is typically restricted to the level of the single market.

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Sexual relationships and self-esteem: Why do Women Get the Short-End of the Stick?

Inquiry@Queen's Undergraduate Research Conference Proceedings ◽

10.24908/iqurcp.7620 ◽

2017 ◽

Author(s):

Morgan Craig-Broadwith

Keyword(s):

Positive Relationship ◽

Negative Relationship ◽

Self Esteem ◽

Sexual Partners ◽

Sexual Relationships ◽

Psychological Perspective ◽

Short Term ◽

Strong Negative Relationship ◽

Number Of Sexual Partners ◽

The Relationship

My study will investigate sex differences in the relationship between number of sexual partners and self-esteem. Previous research has found a moderate positive relationship between number of sexual partners and self-esteem in men, while finding a strong negative relationship in women. Women who engage in more short-term sexual relationships are left feeling vulnerable, depressed, and have lower scores of self-esteem. Men on the other hand, appear to have an ego boost with the more short-term sexual partners they have. Why is this? My study, using an evolutionary psychological perspective, will investigate the relationship between number of sexual partners and self-esteem in hopes of piecing together why men and women are affected so differently.

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Correlates of Stock Market Development and Economic Growth: A Confirmatory Study from Ghana

International Journal of Economics and Finance ◽

10.5539/ijef.v14n3p1 ◽

2022 ◽

Vol 14 (3) ◽

pp. 1

Author(s):

Edward Alabie Borteye ◽

Williams Kwasi Peprah

Keyword(s):

Economic Growth ◽

Stock Market ◽

Positive Relationship ◽

Stock Exchange ◽

Negative Relationship ◽

Positive Association ◽

Market Liquidity ◽

Market Development ◽

Stock Market Development ◽

The Relationship

The study confirms the debate on whether stock market development correlates to economic growth. The dimensions used for the stock market development consisted of market liquidity, size, and capitalization. Economic growth was represented by the real gross domestic product (GDP) growth rate. Based on secondary data obtained from the Ghana Stock Exchange (GSE) and Ghana Statistical Service from 2014 to 2018, a correlational research design was adopted to analyze the data with SPSS 20v by using bivariate and regression. The study found that there is a high positive relationship between market liquidity and economic growth, a moderate negative relationship between market size and economic growth, and a moderate positive relationship between market capitalization and economic growth. Also, the stock market development of market liquidity, size, and capitalization predict 95.7 percent of economic growth. The study summarized that there is a high positive association between stock market development and economic growth as a confirmatory revelation, but all the relationship results were not statistically significant. The result points to the casualty of the relationship between stock market development and economic growth. The study recommends that more firms must be encouraged to be listed on GSE to enhance economic growth in Ghana.

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Is Indian Equity Options Market Suitable for Hedging When the Options Payoff Structure Changes?

Global Journal of Management and Business Research ◽

10.34257/gjmbrbvol20is4pg21 ◽

2020 ◽

pp. 21-32

Author(s):

James Varghese ◽

Dr. Babu Jose

Keyword(s):

Stock Market ◽

Financial Market ◽

Options Market ◽

Equity Options ◽

Index Options ◽

Structure Changes ◽

Payoff Structure ◽

Derivative Market ◽

Indian Stock Market ◽

The Relationship

Investments are essential as the growth of the stock market denoted through increased investments results in the growth of the economy. But they are always subject to various risks in the market. These risks are to be mitigated for the development of an efficient economic system by the market itself. Apart from the stock segment, the Indian financial market is a home for futures and options segments that facilitate the hedging of risks involved in the investments. For considering any derivative market as a hedging tool, one of the prerequisites is the presence of integration between such derivative market and its underlying market. The present study focuses on testing the relationship between Indian stock market and the options market, represented by NSE Nifty 50 index and index options on it respectively, to know whether the options segment is suitable for hedging the risks implicit with investments in the stock market, with substantial consideration to payoff structure of the market denoted by different moneyness groups viz.

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The Impact Of Insider Trading On Market Liquidity In The NASDAQ Market

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v21i4.1454 ◽

2011 ◽

Vol 21 (4) ◽

Cited By ~ 1

Author(s):

Walayet A. Khan ◽

H. Kent Baker ◽

Mukesh Chaudhry ◽

Suneel K. Maheshwari

Keyword(s):

Insider Trading ◽

Market Liquidity ◽

Order Flow ◽

Font Size ◽

Short Term ◽

Cross Sectional ◽

The Impact ◽

The Relationship ◽

Over Time

This study examines the relationship between insider trading and market liquidity (spread and depth) of NASDAQ-100 stocks.  Tests on an intraday sample of sell trades show no evidence of cross-sectional association between the width of the spread and insider trading, but detect some widening of the spread after the fact.  Overall, our results provide mixed evidence on the ability of NASDAQ dealers to unravel informed order flow and adjust spreads accordingly.  Their short-term behavior suggests an inability to detect insider trading and widen spreads, but their behavior over time suggests that dealers may attempt to recover what they apparently lose at a given point and time.

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