In the first essay, we provide new evidence on the relationship between order flow and prices, an issue that is central to asset pricing and market microstructure. We examine proprietary data on a broad panel of NYSE-listed stocks that reveal daily order imbalances by institutions, individuals, and market makers. We can further differentiate regular institutional trades from institutional program trades. Our results indicate that order imbalances from different trader types play distinctly different roles in price formation. Institutions and individuals are contrarians with respect to previous-day returns but differ in the effect their order imbalances have on contemporaneous returns. Institutional imbalances are positively related to contemporaneous returns, and cross-sectional evidence suggests this relationship is likely to be the result of firm-specific information institutions have. Individuals, specialists, and other market makers appear to provide liquidity to these actively trading institutions. Our results also suggest a special role for institutional program trades. Institutions choose program trades when they have no firm-specific information and can afford to trade passively. As a result, program trades provide liquidity to the market. Finally, both institutional non-program and individual imbalances have predictive power for next-day returns. In the second essay, based on daily shorting flow data for a large sample of NYSE-listed stocks, we show that short sellers enhance the relative efficiency of transaction prices. We also provide new evidence on the recent suspension of the Uptick Rule for Regulation SHO Pilot stocks. Relative to matched control stocks, pilot stocks experience some improvement in price efficiency associated with increased shorting activity after the tick test was suspended. The third essay studies demutualization of stock exchanges. Using panel data on 132 major stock exchanges in 114 countries from 1990 to 2003, we examine the effect of demutualization on an exchange’s performance in its primary product markets: trading and listings. We document some evidence that demutualization is associated with improved competitiveness in attracting trading volume. Results on listings following demutualization are weak.

In the first essay, we provide new evidence on the relationship between order flow and prices, an issue that is central to asset pricing and market microstructure. We examine proprietary data on a broad panel of NYSE-listed stocks that reveal daily order imbalances by institutions, individuals, and market makers. We can further differentiate regular institutional trades from institutional program trades. Our results indicate that order imbalances from different trader types play distinctly different roles in price formation. Institutions and individuals are contrarians with respect to previous-day returns but differ in the effect their order imbalances have on contemporaneous returns. Institutional imbalances are positively related to contemporaneous returns, and cross-sectional evidence suggests this relationship is likely to be the result of firm-specific information institutions have. Individuals, specialists, and other market makers appear to provide liquidity to these actively trading institutions. Our results also suggest a special role for institutional program trades. Institutions choose program trades when they have no firm-specific information and can afford to trade passively. As a result, program trades provide liquidity to the market. Finally, both institutional non-program and individual imbalances have predictive power for next-day returns. In the second essay, based on daily shorting flow data for a large sample of NYSE-listed stocks, we show that short sellers enhance the relative efficiency of transaction prices. We also provide new evidence on the recent suspension of the Uptick Rule for Regulation SHO Pilot stocks. Relative to matched control stocks, pilot stocks experience some improvement in price efficiency associated with increased shorting activity after the tick test was suspended. The third essay studies demutualization of stock exchanges. Using panel data on 132 major stock exchanges in 114 countries from 1990 to 2003, we examine the effect of demutualization on an exchange’s performance in its primary product markets: trading and listings. We document some evidence that demutualization is associated with improved competitiveness in attracting trading volume. Results on listings following demutualization are weak.

本論文研究目標為：1. 描述台灣股票市場中訂單簿（order book）的若干特徵。2. 分析訂單流 (order flow) 與訂單簿間交互作用的均衡關係。 3. 探討流動性消耗者與流動性提供者如何進出市場而維持市場機能。 本研究資料來自台灣證券交易所。台灣股市的市場結構迥異於世界其他大部分的市場，採取自動化、間斷時間 (auto-electronic, periodic call) 的撮和方式：單子全部集合在交易所的電腦系統中，依照價格優先、時間優先的原則，每隔45至60秒批次執行撮和。Handa及Schwartz (1996年) 指出，這種市場結構和其他連續撮和的市場有著根本上的不同，尤其是訂單流的匯總方式與市場結清價的形成過程，但目前較少有研究提及。 在過去的文獻中，1995年Biais、Hillion及Spatt以巴黎股市中CAC 40指數的成分股為樣本，首開訂單流與訂單簿間交互作用的研究。他們直接觀察並描繪訂單在各價位的分佈情形，發現當買賣價差 (bid-ask spread) 比較大或訂單簿比較薄（亦即市場流動性較差）時，接下來會有比較多的限價單(limit orders)進場提供流動性；相反地，當spread比較小的時候，接下來會有比較多的市價單(market orders)進場消耗流動性。雖然他們有注意到買賣單、限價單、市價單對價格推升或壓低的作用，但對於引發這些變化的因素卻沒有進一步的闡釋。 1998年，Handa、Schwartz及Tiwari清楚地指出，短暫價格波動 (short-term volatility) 在促進市場達到流動性均衡方面扮演關鍵的角色。由於有基於流動性動機而進場的投資人，此時市價單與限價單成交所造成的短暫價格波動正好補償限價單交易者所面臨的資訊不對稱風險，吸引限價單進場並提供流動性；而有立即性(immediacy)需求的投資人就會下市價單而消耗流動性。1999年，Foucault把Handa等人的推論發展為賽局模型，強化下單決策與價格形成的理論，並建議以訂單流的組成成分進行實證。 這些理論在2000年Ahn、Bae和Chan發表的研究中獲得實證的支持。該文以市場深度差作為市價單限價單組成成分的代理變數，首先驗證短暫價格波動的確是使市場達流動性均衡的重要因素：當價格向上波動，將吸引限價單流入市場提供流動性；而流動性的增加將減緩價格的波動。並進一步分析價格形成過程，發現若價格波動由賣方引發，則限價賣單為流動性提供者；若價格波動來自買方，則限價買單為流動性提供者。 本研究不同於前述研究之處，其一在於台灣股票市場結構的不同。因為所有的單子，不論是新進入或殘留的、不論是買還是賣，全部都集合在電腦系統中等待撮和，因此限價單不見得是流動性提供者，市價單也不見得是流動性消耗者。其二在於直接觀察訂單分佈情形，比Biais等人更深入研究訂單變化、比Ahn等人更清楚地分析變化的過程。 本論文將市場中的單子區分為新委託單(new orders)、殘留單(stale orders)及成交單(executed orders)三大類，取得每個撮和時點前、後買賣雙方在各價位的分佈和變化情形。結果發現，大部分的新委託單並沒有立即成交（約40%沒有立即成交）；成交單中殘留單與新委託單成交的比例在任何時間區間都遠高於新委託單互相成交的比例。也就是說，殘留單對市場流動性的均衡扮演關鍵的角色。

The first essay provides evidence on the origins of the size and value premiums by examining how order flow in the SMB and HML portfolios relates to economic conditions and investor sentiment. We find that buying pressure for SMB and HML is lower (increases) when economic conditions are expected to deteriorate (improve), while it is unrelated to proxies for investor sentiment and sales growth. These findings are consistent with big stock and value stocks being regarded as hedges against adverse shifts in economic conditions, and support a rational state variable interpretation of the size and value premiums. The second essay finds that the marketwide average of individual stock order flows and the difference between the average order flow for big stocks and the average order flow for small stocks (order flow differential) predict growth rates in real GDP, industrial production, and corporate earnings. The predictive significance of these two measures is robust to controls for return factors, suggesting a role for order flow in forecasting stock returns. Consistently, we show that an increase in the order flow differential forecasts higher returns for ten size-sorted portfolios and significantly greater market and size premiums in the subsequent quarter, even after accounting for a large host of variables. These findings are consistent with a world where aggregate order flow brings together dispersed information from heterogeneously informed investors. The third essay shows that stocks that are harder to value (stocks with less valuable growth options and more dispersed analyst forecasts) and stocks that attract less uninformed trading activity (small stocks, illiquid stocks, stocks not covered by analysts) have higher price impacts, greater probabilities of informed trading, and more private information in returns. In the time-series, reductions in trading activity and consumer sentiment increase the average price impact of trading and reduce the share of firm-specific information in returns. Recessions see high price impacts, low trading activity, and a smaller share of private signals in price movements. This reduction in private information seems to have an impact on the informativeness of prices for corporate managers: the sensitivity of corporate investment to the prices is significantly lower during recessions. / Finance

Insider trading may convey information to the market and promote accurate pricing of stocks. In this dissertation, I investigate insider trading at the turn of the century. In the first essay, I investigate insider trading activity in technology stocks during the high price - high volatility period of the late 1990s. I document that insiders of technology firms were heavy sellers during the ten month pre-peak period in which stock prices more than doubled. The technology stocks that were sold by insiders more extensively in the pre-peak period had lower returns in the post-peak period. I furthermore investigate the relation between the net order flows (buyer initiated minus seller initiated trades) and abnormal insider trading activity. I document that the net order flow is positively related to abnormal insider trading activity. However, this positive relation becomes weaker in the peak period; which implies less price discovery through insider trading during the rise of technology stock prices. In the second essay, I document that disclosure requirements significantly affect insider trading behavior. The Sarbanes-Oxley Act of 2002 requires expedited and on-line disclosure of insider transactions. This increase in the visibility of insider trading reduces informational advantage of insiders and increases the likelihood of facing legal sanctions for insiders. I document that insider purchases significantly declined after the Sarbanes- Oxley Act. In addition, the incidences of insider purchases (sales) prior to positive (negative) earnings surprises declined after the Act. Finally, I document that the earnings announcements become more informative after the Act, which is consistent with less price discovery through insider trading prior to earnings announcements. However, the evidence that the decline in insider trading contributes to more informative earnings announcements is pronounced for insider purchases but not for insider sales.

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O objetivo deste trabalho é entender como ocorre a formação do fluxo de ordem do mercado interbancário de câmbio a partir das transações do mercado primário. Analisa-se o mercado cambial no seu nível micro, nas suas instituições e nas assimetrias dos seus participantes, através da abordagem de microestrutura. Utilizam-se três diferentes bases de dados, a primeira com os fluxos de câmbio contratado entre o mercado não financeiro e os bancos comerciais para o período entre 01/09/2008 e 08/07/2016, com dados diários. A segunda com dados mensais entre dezembro de 2013 e agosto de 2016, contempla o mercado primário e secundário de câmbio à vista no Brasil dividido entre cada uma das instituições autorizadas a operar neste mercado pelo Banco Central do Brasil. E a última com os dados do fluxo de ordem interbancário do mercado futuro de câmbio no Brasil para o mesmo período da base de câmbio contratado. Mostra-se a forma pela qual os diferentes fluxos de câmbio contratado afetam a taxa de câmbio. Ademais com duas estimações diferentes e com bases de dados diferentes apresenta-se a relação entre o mercado primário e secundário de câmbio no Brasil, indicando-se que as transações do mercado primário são em grande parte responsáveis pelas transações que ocorrem no mercado interbancário. / The objective of this work is to understand how the formation of the order flow of the interbank foreign exchange market occurs from the transactions of the primary market. The exchange market is analyzed at its micro level, in its institutions and in the asymmetries of its participants, through the microstructure approach. Three different databases are used, the first with the exchange flows contracted between the non-financial market and the commercial banks for the period between 09/01/2008 and 07/08/2016, with daily data. The second with monthly data between December 2013 and August 2016, contemplates the primary and secondary spot exchange market in Brazil divided between each of the institutions authorized to operate in this market by the Central Bank of Brazil. And the last with the interbank order flow data of the future foreign exchange market in Brazil for the same period of the contracted exchange base. It shows the way in which the different flows of contracted exchange rate affect the exchange rate. In addition, with two different estimates and with different databases, the relationship between the primary and secondary exchange markets in Brazil is shown, indicating that primary market transactions are largely responsible for the transactions occurring in the interbank market.

Stock markets employ specialized traders, market-makers, designed to provide liquidity and volume to the market by constantly supplying both supply and demand. In this paper, we demonstrate a novel method for modeling the market as a dynamic system and a reinforcement learning algorithm that learns profitable market-making strategies when run on this model. The sequence of buys and sells for a particular stock, the order flow, we model as an Input-Output Hidden Markov Model fit to historical data. When combined with the dynamics of the order book, this creates a highly non-linear and difficult dynamic system. Our reinforcement learning algorithm, based on likelihood ratios, is run on this partially-observable environment. We demonstrate learning results for two separate real stocks.

O objetivo deste trabalho é entender como ocorre a formação do fluxo de ordem do mercado interbancário de câmbio a partir das transações do mercado primário. Analisa-se o mercado cambial no seu nível micro, nas suas instituições e nas assimetrias dos seus participantes, através da abordagem de microestrutura. Utilizam-se três diferentes bases de dados, a primeira com os fluxos de câmbio contratado entre o mercado não financeiro e os bancos comerciais para o período entre 01/09/2008 e 08/07/2016, com dados diários. A segunda com dados mensais entre dezembro de 2013 e agosto de 2016, contempla o mercado primário e secundário de câmbio à vista no Brasil dividido entre cada uma das instituições autorizadas a operar neste mercado pelo Banco Central do Brasil. E a última com os dados do fluxo de ordem interbancário do mercado futuro de câmbio no Brasil para o mesmo período da base de câmbio contratado. Mostra-se a forma pela qual os diferentes fluxos de câmbio contratado afetam a taxa de câmbio. Ademais com duas estimações diferentes e com bases de dados diferentes apresenta-se a relação entre o mercado primário e secundário de câmbio no Brasil, indicando-se que as transações do mercado primário são em grande parte responsáveis pelas transações que ocorrem no mercado interbancário. / The objective of this work is to understand how the formation of the order flow of the interbank foreign exchange market occurs from the transactions of the primary market. The exchange market is analyzed at its micro level, in its institutions and in the asymmetries of its participants, through the microstructure approach. Three different databases are used, the first with the exchange flows contracted between the non-financial market and the commercial banks for the period between 09/01/2008 and 07/08/2016, with daily data. The second with monthly data between December 2013 and August 2016, contemplates the primary and secondary spot exchange market in Brazil divided between each of the institutions authorized to operate in this market by the Central Bank of Brazil. And the last with the interbank order flow data of the future foreign exchange market in Brazil for the same period of the contracted exchange base. It shows the way in which the different flows of contracted exchange rate affect the exchange rate. In addition, with two different estimates and with different databases, the relationship between the primary and secondary exchange markets in Brazil is shown, indicating that primary market transactions are largely responsible for the transactions occurring in the interbank market.

This diploma thesis deal with creation of trading strategy proposal results in controlling free financial capital of individual. In this diploma thesis is created a tested trading strategy, which is applicable for forex trading. Trading strategy use technical analysis rules, market profile and order flow chart. This strategy was tested on historical data. After that was used on real trading account with aim of maximum profit.