"The Efficacy
of Active and Passive Investment Strategies in the
Institutional and Mutual Fund Spheres" by Christopher
R.E. Joye
Abstract
We provide an empirical investigation of the efficacy
of active and passive investment strategies in the
institutional and mutual fund spheres. The domestic
equity mutual (i.e., retail) fund market is found
to be in Grossman and Stiglitz (1980) style informational
equilibrium. Controlling for asset-pricing anomalies,
benchmark inefficiencies, model misspecification,
and the effects of uninformed liquidity-motivated
trade, the mean active participant earns pre-fee
risk-adjusted excess returns; post fees, returns
are commensurate with that of the market proxy.
In the institutional (i.e., pension) fund universe,
participants exhibit abnormal selectivity abilities
on both a pre- and post-fees basis. These estimates
of abnormal performance confound conventional interpretations
of the efficient markets paradigm. Motivated by
the search for an explanation as to generic comparative
advantages manifest amongst active portfolio managers,
we conjecture that the sophistication of heterogeneous
investor clienteles exerts a deterministic influence
on the abnormal performance realised by active participants.
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"The Impact of
Limit Order Anonymity on Liquidity: Evidence from
Paris, Tokyo and Korea" by Vito Mollica, Alex
Frino and Carole Comerton-Forde
Abstract
This paper examines the impact of broker anonymity
on bid-ask spreads in order driven markets. Previous
theoretical research predicts that limit order anonymity
results in deeper and more liquid markets. This
paper examines this proposition using three natural
experiments provided by Euronext Paris, the Tokyo
Stock Exchange and the Korea Stock Exchange. Euronext
Paris and the Tokyo Stock Exchange removed broker
identifiers from limit orders on April 23, 2001
and June 30, 2003, respectively. In contrast, the
Korea Stock Exchange introduced broker identifiers
for limit order books on October 25, 1999. The results
provide evidence that altering limit order anonymity
has an impact on liquidity. Consistent with expectations,
liquidity is enhanced by increased anonymity and
adversely affected by decreased anonymity.
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"Price Behaviour
Surrounding Block Purchases and Sales: Asymmetric
or Bid-Ask Bias" by Vito Mollica, Alex Frino
and Terry Walter
Abstract
This paper analyses price effects of block trades
for the 30 stocks that comprise the Dow Jones Industrial
Average for the period January 1993 to October 2001.
Previous research shows prices revert following
sales, but remain high after buys, creating an asymmetry
between block purchases and sales. Extant literature
has offered several conjectures as to the source
of the asymmetry. We replicate the asymmetry documented
in previous literature and provide a new conjecture
as to its source, specifically bid-ask bias. Results
show that purging block trade price effects of bid-ask
bias produces symmetry in the behaviour of block
trade price effects. This suggests research design
issues are driving the asymmetry documented in previous
literature, and that purchases are not more informative
than sales.
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