AFA Ph.D. Student Poster Session at the 2020 Annual Meeting(2)

Using a measure of the transmission latency between exchanges in Frankfurt and London and exploiting speed-inducing technological upgrades, we investigate the impact of international transmission latency on liquidity and volatility. We find that a decrease in transmission latency increases liquidity and volatility. In line with existing theoretical models, we show that the amplification of liquidity and volatility is associated with variations in adverse selection risk and aggressive trading. We then investigate the net economic effect of high latency and find that the liquidity deterioration effect of high latency dominates its volatility reducing effect. This implies that the liquidity enhancing benefit of increased trading speed in financial markets outweighs its volatility-inducing effect.

原文链接：

thttps://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFAPS2020&paper_id=13

Text is inherently ambiguous. Yet investors read textual news as the primary source of financial information from the financial news and social media. I used Natural Language Processing on social and financial media text to construct a natural event and Big Data ambiguity measurement. The ambiguity measurement is derived from a mixture of distributions model that distinguishes from disagreement between the two sources. A binomial tree model of ambiguity is then proposed that explains salient points of ambiguity on asset pricing in empirical tests in this paper and in Brenner and Izhakian (2018). The paper finds that the financial news media have a bigger influence on asset prices than social media except in recent periods of recessions. The paper provides a market-wide and natural event evidence of agents’ maxmin utility optimisation behavior in Gilboa and Schmeidler (1989).

原文链接：

https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFAPS2020&paper_id=18