IDEAS home Printed from https://ideas.repec.org/a/taf/quantf/v20y2020i7p1101-1122.html
   My bibliography  Save this article

Assessing the relevance of an information source to trading from an adaptive-markets hypothesis perspective

Author

Listed:
  • George Chalamandaris

Abstract

I propose a framework motivated by the Adaptive Markets Hypothesis (AMH) to analyze the relevance of a specific information source for the trading of a given security. To illustrate the applicability and advantages of this methodology, I explore the extent to which the financial statement (FS) is relevant for Credit Default Swap (CDS) trading. Specifically, I adopt a Bayesian Model Averaging approach to examine properties of the accounting metrics that enter the implied trading heuristics of the market participants. Hypothesis-testing is conducted on various horizons around the announcement dates of corporate results. The diversity of trading rules and the shift in the heuristics mix that occurred after 2008 support the AMH perspective. Overall, results show that there is a significant component of profit-motivated trading in the CDS market that relies on financial statement information, even after controlling for information transmission from alternative trading forums. Out of sample trading strategies confirm the robustness the main findings.

Suggested Citation

  • George Chalamandaris, 2020. "Assessing the relevance of an information source to trading from an adaptive-markets hypothesis perspective," Quantitative Finance, Taylor & Francis Journals, vol. 20(7), pages 1101-1122, July.
    • Handle: RePEc:taf:quantf:v:20:y:2020:i:7:p:1101-1122
    DOI: 10.1080/14697688.2020.1726438
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/14697688.2020.1726438
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/14697688.2020.1726438?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ke Meng & Shouhao Li, 2021. "The adaptive market hypothesis and high frequency trading," PLOS ONE, Public Library of Science, vol. 16(12), pages 1-19, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:quantf:v:20:y:2020:i:7:p:1101-1122. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RQUF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.