Business Commons^™

How Commonality Persists? (Through Investors' Sentiment And Attention), Chyng Wen Tee, Raja Velu, Zhaoque Zhou

Research Collection Lee Kong Chian School Of Business

Studies on commonality generally attribute the variation in asset returns to the variation in order flows. In this research study, we show that order flows do not predict asset returns, rather their relationship have been static over time. Thus we model both returns and the order flows as endogenous variables, and use investors' sentiment and attention as exogenous factors via a reduced-rank regression. We provide empirical evidence to demonstrate that cross-sectional commonality in attention (sentiment) is linearly (nonlinearly) associated with both returns and order flows at the intraday level, while the sentiment and attention measures themselvesexhibit a nonlinear mutual relationship, …

Commonality In Two-Dimensions: An Empirical Investigation, Zhaoque Zhou

Dissertations - ALL

In this thesis, I follow Hasbrouck and Seppi (2001)’s work and use reduced-rank regression to model the commonality in Chapter Two. The literature on the study of return commonality generally attributes its source to the order flow. But I find that return and order flows are endogenous and use the new exogenous Twitter sentiment dataset to show that return commonality may be due to sentiment and attention. Furthermore, I observe the non-linear (linear) relationship between sentiment (attention) and return commonality. Finally, I may export the non-linear relationship using the same reduced-rank regression framework in future research.

I also follow Korajczyk …

Why Commonality Persists?, Chyng Wen Tee, Raja Velu, Zhaoque Zhou

Research Collection Lee Kong Chian School Of Business

We show that order flows do not exhibit predictive power on asset returns, and their relationships have been static over time. We use a reduced-rank regression formulation to model both returns and the order flows as endogenous variables, and use investors' sentiment and attention as exogenous factors. We provide empiricalevidence to demonstrate that cross-sectional commonality in attention (sentiment) is linearly (nonlinearly) associated with both returns and order flows at the intraday level, while the sentiment and attentionmeasures themselves exhibit a nonlinear mutual relationship, thus revealing the multi-dimensional aspect of the commonality relationship.

Why Commonality Persists?, Raja Velu, Zhaoque Zhou, Chyng Wen Tee

Research Collection Lee Kong Chian School Of Business

Studies on commonality in returns, order flows and liquidity find that the first principal component is closely aligned with the market factor. With the increasing presence of high-frequency trading, commonality in returns, order flows, and liquidity can potentially arise from the commonality in the interpretation of real-time signals. In this paper, we go beyond the first factor and show that the other dominant principal components consistently reflects investors' herding behavior, demonstrating the multi-dimensional aspect of commonality. Instead of relating the asset returns to order flows, we take both as endogenous, and provide empirical evidence showing that returns commonality is driven …

Commonality: A Longitudinal Study, Raja Velu, Zhaoque Zhou, Chyng Wen Tee

Research Collection Lee Kong Chian School Of Business

The commonality in the asset characteristics such as returns, liquidity and other non-trade parameters attracted intense research interest in the literature. In this paper, we investigate the longitudinal trend in commonality for the duration 2000-2016, an extensive that include years of boom and bust in the financial market. Our results show that while market has become more fragmented, commonality in returns has doubled over this period. This observation holds across all exchanges, with a clear trend of convergence in exchange-wide commonality over time due to increased information efficiency. We develop a unified methodology to systematically accommodate all explanatory factors for …

Global Market Liquidity And Corporate Investments, Abdulrahman Alhassan

University of New Orleans Theses and Dissertations

The dissertation consists of two essays. The first essay investigates how oil market factors impact on liquidity commonality in global equity markets. I identify two transmitting channels of the effect on liquidity commonality, namely oil price return and volatility. Using a sample of firms drawn from 50 countries spanning from Jan 1995 to Dec 2015, I find that both effects in oil explain the liquidity commonality in countries with higher integration to oil market. In addition, I show that oil volatility effect is more pronounced in net oil exporters compared to net oil importers after controlling for oil sensitivity. My …