Showing papers on "Algorithmic trading published in 1972"
TL;DR: In this paper, the authors examine the extent to which block trading by institutional investors contributes to or detracts from efficient stock markets, defined as a transaction involving a larger number of shares than can readily be handled in the normal course of the auction market.
Abstract: IN AN EFFICIENT market, prices reflect underlying values. This insures the proper allocation of new funds to the most productive areas of the economy. Additionally, individual investors benefit by knowing that prices at which they trade are not subject to forces which have little or nothing to do with the underlying value of the company. Extensive empirical tests which tend to support the efficiency of the stock market have been carried out in the past.' Until recently, however, no tests have been carried out to assess directly the impact of institutional investors on the efficiency of the stock market.2 The purpose of this paper is to examine the extent to which block trading by institutional investors contributes to or detracts from efficient markets. A block trade can be defined as a transaction involving a larger number of shares than can readily be handled in the normal course of the auction market.
703 citations
TL;DR: Wu et al. as discussed by the authors investigated the trading activities of oddlotters and their market impact and found that odd-lot traders are more likely to be in the relatively lower income group and are generally less speculative and sophisticated than large investors, such as institutional investors.
Abstract: Hsiu-Kwang Wu-* The purpose of this study is to investigate the trading activities of oddlotters and their market impact. Odd-lotters are usually small investors who do not have the resources to trade on a round-lot basis. For instance, on the New York Stock Exchange the unit of trading, the round-lot, is usually 100 shares with the exception of a few inactive stocks. Therefore, the odd-lotters are more likely to be in the relatively lower income group and are generally less speculative and sophisticated than large investors, such as institutional investors. In view of the important role of small investors, the general interest in the stock market, and the availability of data, it is rather surprising that there has been so little rigorous and systematic study of odd-lot activities. In fact, there has been no major study since World War II.1 If odd-lot trading contributes to price stability and market activity, then this trading is beneficial in an economic sense because both characteristics are conductive to a liquid market. Indeed, according to classical economists, all speculative trading with profits increases market efficiency and is beneficial because it creates liquidity and stability by providing an active and broad market while reducing intertemporal differences in price.2 A popular belief
13 citations
01 Dec 1972
TL;DR: In this paper, the authors present a theory which determines the quantity of futures contracts held by an individual trader, whether he is risk-averting or risk-loving, using a method alternative to the indifference curve analysis.
Abstract: The aim of this paper is twofold. Models of futures trading developed recently do not, in my view, deal adequately with certain aspects of individual equilibrium. For example, J. L. Stein’s theory does not determine explicitly the quantity of stocks held by the individual; the Peston and Yamey model does not deal with individual equilibrium at all; and that of Leland Johnson does not analyse the market position of an individual who is risk-loving.1 The purpose of Section 1 is to present a theory which determines the quantity of futures contracts held by an individual trader, whether he is risk-averting or risk-loving, using a method alternative to the indifference curve analysis.2
5 citations