Defining ambiguity as investor's uncertainty about the precision of the observed information, Chapter One constructs an empirical measure of ambiguity based on analysts' earnings forecast information, and finds that the market tends to react more negatively to highly ambiguous bad news, while it tends to be less responsive to highly ambiguous good news. This result supports the theoretical argument of Epstein and Schneider (2003, 2008) that ambiguity-averse investors take a worst-case assessment of the information precision, when they are uncertain about the information precision. In addition, Chapter One shows that returns on stocks exposed to highly ambiguous and intangible information are more negatively skewed. Chapter Two finds that certain traders are informed about either the forthcoming analysts' forecasts or long-term value of the stock, and informed traders prefer to use medium-size trades to exploit their private information advantage. Specifically, medium-size trade imbalance prior to the forecast announcements is positively correlated with the nature of forecast revisions, while in the days immediately after the forecasts medium-size trade imbalance is positively correlated with future stock returns for up to four months. Small-size trade imbalance is also positively correlated with future returns but only following downward revisions. In contrast, it is also shown that large trades placed right after the forecasts are unprofitable and generate slightly negative profits in the long run. Overall, our results are consistent with the "stealth trading hypothesis" proposed by Barclay and Warner (1993).

Syfte – Studiens syfte är att bidra till kunskap om hur SCOR-modellen kan användas för att identifiera och förbättra en kritisk process i ett orderflöde med avseende att höja pålitligheten i leveranser till kund. För att uppfylla syftet har det brutits ner i tre delmål.Delmål 1: Att kartlägga det nuvarande orderflödets materialflöde och informationsflöde.Delmål 2: Att utvärdera orderflödet med hjälp av SCOR-modellen och identifiera en kritisk process med avseende att höja pålitligheten i leveranser till kund.Delmål 3: Att analysera den kritiska processen utifrån SCOR-modellen och identifiera förbättringspotential med avseende att höja pålitligheten i leveranser till kund.Metod – För att uppfylla studiens syfte genomfördes en fallstudie på Expedit AB. Litteraturstudier utfördes för att skapa ett teoretiskt ramverk. Insamlingen av empirin bestod av intervjuer, dokumentstudier och observationer. För att analysera data användes mönsterpassning samt analysverktygen flödeskartläggning och orsak-verkan-diagram. Vid beräkningar användes SCOR-modellens beräkningsmetoder.Resultat – Genom intervjuer, observationer och flödeskartläggning kunde det första delmålet uppfyllas och illustreras. Utvärderingen resulterade i att inköpsprocessen identifierades som den kritiska processen då 55% av avvikelserna kopplade till pålitlighet i leverans till kund var relaterade till inköpsprocessen. De identifierade problemområdena i den kritiska processen var bristande kommunikation, variationer, bristande standarder, felaktig orderregistrering och externa avvikelser. SCOR-modellens praxis för inköpsprocessen kunde lösa bristande kommunikation, variationer, felaktig orderregistrering samt externa avvikelser. Bristande standarder löstes genom kompletterande teori och därmed kunde syftet uppfyllas.Implikationer – Denna studie har visat hur en kritisk process i ett orderflöde kan identifieras och förbättras med avseende på att höja pålitligheten i leveranser till kund. Studien har bidragit till att stärka nuvarande teori.Begränsningar – Studien innefattar en enfallsstudie men det hade varit önskvärt att använda sig av en flerfallstudie för att höja generaliserbarheten hos studien. De flesta intervjuer bygger mestadels på följdfrågor och detta sänker reliabiliteten hos studien då dessa frågor är beroende av respondentens svar. / Purpose – The purpose of this thesis is to develop an understanding on how a crucial process can be identified and how to make it more efficient in order to increase delivery reliability to customer using the SCOR-model. To fulfil the purpose it has been broken down into three parts:Part 1: To map the current order flow with material flow and information flowPart 2: To evaluate the order flow using the SCOR-model and identify a crucial process in order to increase delivery reliability to customerPart 3: To analyze the crucial process using the SCOR-model and identify areas of improvement in order to increase delivery reliability to customerMethod – In order to meet the purpose of thesis, a case study has been conducted on Expedit AB. Literature studies were performed to create a theoretical framework. To gather empirical data, interviews, document studies and observations was conducted. To analyze the empirical findings pattern matching was used and also analyze tools such as flow mapping and cause-and-effect-diagram. The supply chain operations reference model calculations methods were used to make calculations.Findings – The first part of the purpose was accomplished through interviews, observations and was illustrated in a flow map. As a result of the evaluation of the order flow the purchasing process was identified as the crucial process. This conclusion was made since 55% of the deviations was related to the purchasing process. Five areas of improvement were identified within the crucial process was lack of communication, variations, lack of standards, incorrect order registration and external deviations. In order to handle problems related to lack of communication, variations, incorrect order registration and external deviations the SCOR-models purchasing practices were used. In order to handle problems related to lack of standards additional theories where used and by doing so the purpose could be fulfilled.Implications – This study has shown how a crucial process in an order flow can be identified and how to make it more efficient in order to increase delivery reliability to customer. The study has contributed to strengthening existing theories.Limitations – This case study only consist one case instead of several which would have increased the generalizability of the study. A majority of the conducted interviews are mostly based on supplementaries, this lower the reliability of the study since these questions are based on the respondents answers.

This dissertation consists of five separate and self-contained essays. They have been written as distinct papers. Although there is a fair amount of overlap and cross-reference in analysis and discussion, the intention is that potential readers should be able to read them separately. Essay 1: An Empirical Analysis of the Trading Structure at the Stockholm Stock Exchange.This essay describes and analyzes the trading structure at the Stockholm Stock Exchange. In the empirical part, we report stylized facts based on intraday transaction and order book data, focusing on the intraday behavior of returns, trading activity, order placement and bid/ask spread, on the importance of the tick size and finally on some characteristics of the limit order book. Our main empirical conclusions are that a) the intraday U-shape in trading activity found in earlier U.S. studies on the whole also pertains to the Stockholm Stock Exchange, b) the limit order placement also follows an intraday U-shape, c) there is no distinct intraday pattern in returns, d) the volatility and bid/ask spread seems to be higher at the beginning of the trading day, e) the tick size is economically important, and f) the price impact of an order is a nonlinear function of its quantity, implying price inelastic demand and supply. Essay 2: An Empirical Analysis of the Trading Structure at the Stockholm Options and Forwards Exchange, OM.We first describe and analyze the trading structure at the Stockholm Options and Forward Exchange, OM Stockholm. It is characterized by some interesting market microstructure features, such as a high degree of transparency in a fully computerized trading system and a possibility to submit combination orders. We also present empirically results from tests on the intra- and interday trading volume of the OMX index derivatives, both in terms of number of contracts traded and in terms of number of transactions. There is evidence of a high degree of intraday variation in trading volume and some interday variation. The extension of trading hours of the underlying stocks, during the studied period should, according to modern trade concentration models, affect the distribution of trading across the day. Although no formal test of the models is possible with this data set, we are able to shed some supportive additional light on all of these models. Essay 3: Tick Size, Market Liquidity and Trading Volume: Evidence from the Stockholm Stock Exchange. (This essay was co-authored with Patrik Sandås.)The regulated tick size at a securities exchange puts a lower bound on the bid/ask spread. We use cross-sectional and cross-daily data from the Stockholm Stock Exchange to assess if this lower bound is economically important and if it has any direct effect on market depth and traded volume. We find a) strong support that the tick size is positively correlated to market depth and c) some support that it is negatively related to traded volume. We identify different groups of agents to whom a lower tick size would be beneficial and to whom it would be detrimental. Essay 4: An Analysis of the Lead-Lag Relationship between the OMX Index Forwards and the OMX Cash Index.This essay investigates the intraday lead-lag structure in returns between on the one hand the OMX cash index and on the other hand the OMX index forwards and the OMX synthetic index forwards in Sweden. The data set includes 22 months of data, from December 1991, to September 1993. It is divided into three sub-periods. The main conclusion is that there is a high degree of bidirectional interdependence, with both series Granger causing each other. Using a Sims-test, we find that the forwards as well as synthetic forwards lead the cash index with between fifteen and thirty minutes, while the cash index leads the forwards with about ten to fifteen minutes.. This implies a longer lead from the cash index to the forwards than in previous studies. The large interdependence could possibly be due to higher transaction costs, lower liquidity in the forward market and the specific trading environments used for Swedish securities. Essay 5: Order Flow Dynamics: Evidence from the Helsinki Stock Exchange. (This essay was co-authored with Kaj Hedvall.)This essay investigates the dynamics of the order flow in a limit order book. In contrast to previous studies, our data set from the Helsinki Stock Exchange encompasses the entire order book structure, including the dealer identities. This enables us to focus on the order behavior of individual dealers. We classify the events in the order book and study the structure of subsequent events using contingency tables. In specific, the structure of subsequent events initiated by the same dealer is compared to the overall event structure. We find that order splitting is more frequent than order imitation. Furthermore, if the spread increases as a result of a trade, other dealers quickly restore the spread, by submitting new limit orders. One conclusion is therefore that there exists a body of potential limit orders outside the formal limit order book and that there is a high degree of resiliency in our limit order book market. As a logical consequence, a large dealer strategically splits his order, in order for the market to supply additional liquidity. One interpretation of our results is that a limit order book market can accommodate larger orders than is first apparent by the outstanding limit orders. Another interpretation is that a limit order book structure gives room for informed traders to successively trade on their information. A third interpretation is that prices only slowly incorporate new information. / Diss. Stockholm : Handelshögskolan, 1994

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Motivated by a zero-intelligence approach, the aim of this thesis is to unify the microscopic (discrete price and volume), mesoscopic (discrete price and continuous volume) and macroscopic (continuous price and volume) frameworks of limit order books, with a view to providing a novel yet analytically tractable description of their behaviour in a high to ultra high-frequency setting. Starting with the canonical microscopic framework, the first part of the thesis examines the limiting behaviour of the order book process when order arrival and cancellation rates are sent to infinity and when volumes are considered to be of infinitesimal size. Mathematically speaking, this amounts to establishing the weak convergence of a discrete-space process to a mesoscopic diffusion limit. This step is initially carried out in a reduced-form context, in other words, by simply looking at the best bid and ask queues, before the procedure is extended to the whole book. This subsequently leads us to the second part of the thesis, which is devoted to the transition between mesoscopic and macroscopic models of limit order books, where the general idea is to send the tick size to zero, or equivalently, to consider infinitely many price levels. The macroscopic limit is then described in terms of reflected SPDEs which typically arise in stochastic interface models. Numerical applications are finally presented, notably via the simulation of the mesocopic and macroscopic limits, which can be used as market simulators for short-term price prediction or optimal execution strategies.

A stochastic model for the dynamics of a limit order book is evaluated and tested on empirical data. Arrival of limit, market and cancellation orders are described in terms of a Markovian queuing system with exponentially distributed occurrences. In this model, several key quantities can be analytically calculated, such as the distribution of times between price moves, price volatility and the probability of an upward price move, all conditional on the state of the order book. We show that the exponential distribution poorly fits the occurrences of order book events and further show that little resemblance exists between the analytical formulas in this model and the empirical data. The log-normal and Weibull distribution are suggested as replacements as they appear to fit the empirical data better.