CEU Electronic Theses and Dissertations, 2024
| Author | Ustun, Ceyda |
|---|---|
| Title | Essays in Financial Economics |
| Summary | Chapter 1: In cases of liquidity imbalances in the market, I examine the role of small traders in liquidity provision at different frequencies and whether they have a role in leaning against the imbalance. Using data from the benchmark Turkish BIST30 index from Borsa Istanbul for 2019, this paper examines the liquidity imbalance and returns with different levels of frequencies and different type traders categories, especially small traders. I find that small traders may have an important role in providing liquidity not only at a daily level but also at an intraday level. I show that small traders, especially those classified as passive (i.e., those who transact mostly via limit orders) provide liquidity of higher magnitude compared to those classified as aggressive (i.e., those who transact mostly via market orders). More active aggressive small traders are liquidity takers from the market by chasing trends, whereas less active aggressive small traders enter the market later and provide liquidity with a delay at an intraday level. The passive small traders seem to profit more from the liquidity provision than those classified as aggressive in my sample. Chapter 2: This paper investigates the trading patterns of small traders, specifically their buying and selling activities over different time horizons for one stock from the benchmark Turkish BIST30 index in 2019. The main focus of the paper is the active small traders, and I show that they are likely to remain active if they were active during previous time interval. Additionally, these traders tend to buy when price is falling and sell when prices are rising, but there seems to be an asymmetry in their buying and selling patterns, where they buy more easily than they sell. At a daily level, active small traders tend to make reversals in their buy and sell patterns, whereas at an intraday level, they tend to keep momentum by continuing to buy or sell if they had already bought or sold previously. Furthermore, active small traders react to the stock-related news and buy more, both at the daily and intraday level. Their contemporaneous reaction to stock related news for the case of buying is higher in magnitude than the case of selling. Chapter 3:This paper investigates the trading patterns of intraday intermediaries in an automated stock market before and during a period of temporary liquidity shock in the form of large selling pressure. The study focuses on 30 stocks under the benchmark index BIST30 of Borsa Istanbul. In order to classify accounts as intraday intermediaries, a data-driven approach based on the accounts' trading activity and inventory pattern is adopted. I analyze minute-by-minute comovement between inventory changes and price changes to determine if there is any trading pattern change during the selling pressure period. I find that the trading pattern of intraday intermediaries classified as high frequency traders changed during the selling pressure period. Furthermore, the results indicate that this change mostly resulted from their aggressive holdings, which suggests a reduction in their liquidity removal (an increase in liquidity provision) and a preference to trade less aggressively during the liquidity shortage. |
| Supervisor | Ádám Zawadowski |
| Department | Economics PhD |
| Full text | https://www.etd.ceu.edu/2024/ustun_ceyda.pdf |
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