Why commonality persists?
We show that order flows do not exhibit predictive power on asset returns, and their relationships have been static over time. We use a reduced-rank regression formulation to model both returns and the order flows as endogenous variables, and use investors' sentiment and attention as exogenous...
Saved in:
Main Authors: | , , |
---|---|
Format: | text |
Language: | English |
Published: |
Institutional Knowledge at Singapore Management University
2022
|
Subjects: | |
Online Access: | https://ink.library.smu.edu.sg/lkcsb_research/7096 https://ink.library.smu.edu.sg/context/lkcsb_research/article/8095/viewcontent/Why_Commonality_Persists.pdf |
Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
Institution: | Singapore Management University |
Language: | English |
Summary: | We show that order flows do not exhibit predictive power on asset returns, and their relationships have been static over time. We use a reduced-rank regression formulation to model both returns and the order flows as endogenous variables, and use investors' sentiment and attention as exogenous factors. We provide empiricalevidence to demonstrate that cross-sectional commonality in attention (sentiment) is linearly (nonlinearly) associated with both returns and order flows at the intraday level, while the sentiment and attentionmeasures themselves exhibit a nonlinear mutual relationship, thus revealing the multi-dimensional aspect of the commonality relationship. |
---|