Chan, Louis K.C. and Josef Lakonishok (1995), The Behavior of Stock Prices around institutional trades, The Journal of Finance, 50, 1147-1174.  Home/Search   Document Not in Database   Summary   Related Articles   Check

....markets and many derivative markets, but probably not for most stock markets. The short selling rules in the American stock market are an example of a built in asymmetry. From an empirical point of view for American equities the market impact of buying and selling are different, as observed by Chan and Lakonishok (1993, 1995). Such asymmetries can be taken into account by in terms of a different liquidity for buying and selling. For the purposes of this study strategies will be fixed. This implies, for example, that profits are not reinvested. We study the price dynamics in the context where the noise inputs are ....

....it is actually quite different. To see this, assume the initial price clears the market, so that the market maker s starting position is zero. The market maker s position at subsequent times is then just , 7. For discussions of empirical evidence concerning market impact see Hausman and Lo (1992) Chan and Lakonishok (1993, 1995), Campbell et al. 1997) Torre (1997) and Keim and Madhaven (1999) Zhang (1999) has offered a heuristic derivation of a nonlinear market impact rule. 8. See, e.g. Huang and Stoll (1994) w 2 w 1 = f 1 P w , f P w , f w dp dt b D p . D b D D p ( ....

Chan, L. K.C., and J. Lakonishok, 1995, The behavior of stock prices around institutional trades, Journal of Finance 50, 1147-1174.

....9 In Section 4 we will consider a fourth exogenous element: parameter shifts, sudden changes in the governing parameters of the price dynamics. 10 Our discussion largely reflects the work of Kraus and Stoll (1972) and the subsequent work of Holthausen, Leftwich, and Mayers (1987, 1990) and Chan and Lakonishok (1993, 1995). See also Keim and Madhavan (1995, 1997) 11 Over long term investment time scales or in extremely volatile markets, it is important to consider geometric rather than arithmetic Brownian motion; this corresponds to letting oe in (1) scale with S. But over the short term trading time ....

Chan, L. K. C. and J. Lakonishok (1995). The behavior of stock prices around institutional trades. J. Finance 50, 1147--1174.

....fund trading costs can be interpreted as the cost of implementing an investment strategy. Our results confirm the negative relation found between expense ratios and fund returns and extend the conclusions drawn in indirect analyses of the relation between 1 Keim and Madhavan (1993, 1995) Chan and Lakonishok (1995), and Jones and Lipson (1999) examine trade execution costs for specific institutional trades. By contrast, we aggregate fund s trading costs and show the accumulated effect on fund returns. 2 fund trading costs and fund returns (see e.g. Grinblatt and Titman (1989) Elton et al. 1993) ....

....spread for all fund trades regardless of trade size. Trading costs are likely to depend on the size of the total trade package (i.e. the quarterly position change) as well as how the trade package is broken up into individual trades. Using data on actual trade packages of institutional investors, Chan and Lakonishok (1995) find that 78 of institution s trade packages are executed over two or more days and that the estimated price impact cost is 1 for buys and 0.35 for sells. Since we do not know how fund position changes are executed during the quarter we apply the same effective spread to all fund trades in a ....

Chan, L.K.C., J. Lakonishok, 1995. The behavior of stock prices around institutional trades, Journal of Finance, 50, 1147-1174.

....order based on factors other than its size and direction will be neglected. The resulting model will be based on market orders only, and will assume that all trades are made with a single market maker. The strategy is to simplify the description of market making in order to 1. Chan and Lakonishok [10] observed that the identity of the trader is more important than the order size in determining price impact. However, their sample consisted of trades from many different institutions, with heterogeneous trading styles and different levels of patience. The level of patience is clearly very ....

....traders from profiting by trading through circuits. If there are differences in the overall liquidity for buy and sell orders, under the ansatz of equation 8 we can expect a discontinuity in the derivative of at . This was observed by Chan and Lakon f f w 0 = November 30, 1998 17 ishok [10], who studied market impact in the American stock market 1 . Unless otherwise stated we will assume the market is symmetric. 2.4 Dynamics This section uses the market impact function derived so far to develop a dynamical system that describes the feedback loop between the placement of orders ....

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Louis K.C. Chan and Josef Lakonishok, "The behavior of stock prices around institutional trades", Journal of Finance, 50 (1995) 1147-1174.

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Chan, Louis K.C. and Josef Lakonishok (1995), The Behavior of Stock Prices around institutional trades, The Journal of Finance, 50, 1147-1174.

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Chan, L. and J. Lakonishok, 1995, "The Behavior of Stock Prices Around Institutional Trades", Journal of Finance, 1147-74.

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