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Stock margins and the condition probability of price reversals

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Author Info

  • Paul Kofman
  • James T. Moser

Abstract

Does the cost of trading affect stock prices? Yes, according to the evidence in this article. The authors find that high costs seem to reduce the frequency of price reversals.

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File URL: http://www.chicagofed.org/digital_assets/publications/economic_perspectives/2001/3qepart1.pdf
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Bibliographic Info

Article provided by Federal Reserve Bank of Chicago in its journal Economic Perspectives.

Volume (Year): (2001)
Issue (Month): Q III ()
Pages: 2-12

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Handle: RePEc:fip:fedhep:y:2001:i:qiii:p:2-12:n:v.25no.3

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Related research

Keywords: Stocks ; Stock - Prices;

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References

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  1. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
  2. Stoll, Hans R & Whaley, Robert E, 1990. "Program Trading and Individual Stock Returns: Ingredients of the Triple-Witching Brew," The Journal of Business, University of Chicago Press, vol. 63(1), pages S165-92, January.
  3. Campbell, John Y & Grossman, Sanford J & Wang, Jiang, 1993. "Trading Volume and Serial Correlation in Stock Returns," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 905-39, November.
  4. Andrew W. Lo & Craig A. MacKinlay, . "An Econometric Analysis of Nonsyschronous-Trading," Rodney L. White Center for Financial Research Working Papers 19-89, Wharton School Rodney L. White Center for Financial Research.
  5. Gikas A. Hardouvelis, 1988. "Margin requirements, volatility, and the transitory component of stock prices," Research Paper 8818, Federal Reserve Bank of New York.
  6. Hsieh, David A & Miller, Merton H, 1990. " Margin Regulation and Stock Market Volatility," Journal of Finance, American Finance Association, vol. 45(1), pages 3-29, March.
  7. Summers, Lawrence H, 1986. " Does the Stock Market Rationally Reflect Fundamental Values?," Journal of Finance, American Finance Association, vol. 41(3), pages 591-601, July.
  8. De Long, J Bradford, et al, 1990. " Positive Feedback Investment Strategies and Destabilizing Rational Speculation," Journal of Finance, American Finance Association, vol. 45(2), pages 379-95, June.
  9. James T. Moser, 1992. "Determining margin for futures contracts: the role of private interests and the relevance of excess volatility," Economic Perspectives, Federal Reserve Bank of Chicago, issue Mar, pages 2-18.
  10. Salinger, M.A., 1989. "Stock Market Margin Requirements And Volatility: Implications For Regulation Of Stock Index Futures," Papers t4, Columbia - Center for Futures Markets.
  11. Schwert, G William, 1990. "Indexes of U.S. Stock Prices from 1802 to 1987," The Journal of Business, University of Chicago Press, vol. 63(3), pages 399-426, July.
  12. Bessembinder, Hendrik & Seguin, Paul J., 1993. "Price Volatility, Trading Volume, and Market Depth: Evidence from Futures Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(01), pages 21-39, March.
  13. Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
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Citations

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Cited by:
  1. Peter Fortune, 2001. "Margin lending and stock market volatility," New England Economic Review, Federal Reserve Bank of Boston, pages 3-25.
  2. Alexander, Gordon J. & Ors, Evren & Peterson, Mark A. & Seguin, Paul J., 2004. "Margin regulation and market quality: a microstructure analysis," Journal of Corporate Finance, Elsevier, vol. 10(4), pages 549-574, September.

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