Signals in equity trading

Trading volume and dispersion of signals 

Vidhani (2020) explains about the relation between trading volume and dispersion of signals.

He speaks about the disagreement between the investors in relation to the share price and regarding decisions of buying and selling. The value of the stock is compared to the current stock price. Trade is initiated when the intrinsic value is smaller than the current price.

The researcher has used in total 36 anomalies and seven categories in which he categorized these 36 anomalies. These anomalies are correlated to future returns. Anomalies are something that deviates from the normal. In his paper he has mainly used stock price and the accounting fundamentals. There are in total seven categories in which these anomalies are categorised. The seven categories are profitability(6), earnings quality (3), valuation (4), momentum (5), investment (9), financing (6), distress (2).  He has used a regression model in order to prove his hypothesis. 

The findings suggest that the investors fall back to use return anomalies if the flow of value information from the firm is disrupted or delayed. 

The original paper – https://emergingmarketsconference.org/PDF/CONF_2020/Vidhani_2020.pdf

Sensationalism in online news

Thirumalai is the panelist which speaks about Gunchang Kim’s paper on sensationalism in online news.

The author compares the tone of online and offline news. It says that there is a difference between the tone of online and offline news. Greater the volatility of the news, higher is the share turnover. Tome of online news especially the title and lead paragraph has an impact on market response. Online news has a greater impact on an individual as compared to the print media. Sensationalizing online news is a way to grab investor’s attention. Hypothesis of the study is that newspapers have incentives to sensationalize online articles for economic reasons.

 It also identifies other methods to grab attention. Also a lot of analyses are made on the  online and offline news.

The original presentation – https://emergingmarketsconference.org/PDF/CONF_2020/sl_Kim_discussion2020.pdf

The summary was prepared by Dishant Savla.

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