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By Irene Aldridge “The Trump effect” has captured news headlines. The unprecedented rise in the U.S. stock markets following the November 8, 2016, election has taken many investors by surprise. Some portfolio managers and commentators question how long it will last. Others proclaim it a bubble that has just hit a natural ceiling for stock prices. Still others call it a “suckers’ rally”, a stock rally with little fundamental information to back up the price movements. Even the legendary Carl Icahn himself proclaimed on December 10, 2016, that “The Trump rally in stocks may have gone too far” (http://www.businessinsider.com/carl-icahn-trump-rally-2016-12). Of course, the market has reachedRead More →

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In the last year or so, stock prices have been moving drastically up and down, a phenomenon known as market volatility. The latest research from AbleMarkets shows that investors can help reduce intraday volatility by collectively expressing their opinions about a stock’s imminent direction on social media. By speaking up online, investors appear to speed up the formation of market consensus and the resulting price adjustment, minimizing price volatility in the process. Social media continuously updates our collective knowledge of financial markets. Investors posting their thoughts online and experiences with a particular publicly-traded firm may encourage others to consider investing into the stock of thatRead More →

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New research from AbleMarkets shows that stocks with higher participation of aggressive High-Frequency Traders (HFT) experience higher intraday volatility. The new study compares intraday volatility, as measured by the difference between the daily high and low and normalized by the daily closing price, with aggressive HFT participation captured by AbleMarkets aggressive HFT index. Every 1% increase in AbleMarkets aggressive HFT index on a given trading day on average corresponds to 2% increase in volatility on the same day across all of the S&P 500 stocks. Aggressive HFTs comprise a set of trading strategies that use predominantly market orders (as opposed to limit orders) to executeRead More →

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By Irene Aldridge What is the quantitative evidence regarding the presence of aggressive high-frequency traders (HFTs) in today’s markets? Our firm’s AbleMarkets Aggressive HFT Index tracks the participation of aggressive HFTs in real-time and offers some interesting observations. As 2014 rolls to a close, we are able to offer comprehensive statistics on tick-by-tick, minute-by-minute and hour-by-hour evolution of aggressive HFT participation during this past year, as well as daily statistics presented in this article. Why does aggressive HFT participation matter? Multiple academic studies have confirmed that aggressive HFTs worsen market conditions for institutional investors. The aggressive HFTs are not to be confused with the passiveRead More →

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By Irene Aldridge Many articles on the subject of money talk about different ways to invest the money: which stocks to pick, whether to choose bonds over stocks and Exchange-Traded Funds (ETFs) versus mutual funds. Few of the pieces, however, address the key issue underlying any allocation which may be keeping investors up at night: the implicit costs of placing their money into someone else’s hands. Any investment decision amounts to just that: transferring money into someone else’s care. When purchasing stock of a particular company, an investor transfers his money to the management of the stock-issuing corporation with the sole hope that the managementRead More →

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By Irene Aldridge The latest turmoil observed in the European and U.S. markets may be symptomatic of a broader problem: changing behavior in financial securities. Historically, prices of unrelated securities used to rise and fall independently of each other and without great influence from the broader markets. Recent studies show that when markets rise, individual stocks still behave differently: some rise and some fall. Yet, when today’s markets fall, most stocks tend to fall in unison, amplifying negative performance of individual equities. The shifting risk-return characteristics of financial markets may influence the outcomes of investing styles, and change the way people look at markets forRead More →