TY - JOUR
T1 - Trading Behavior and Monetary Policy News
AU - Smales, Lee A.
PY - 2018/12
Y1 - 2018/12
N2 - The author examines the patterns of trading behavior in the period surrounding monetary policy announcements. Utilizing a high-frequency dataset, with broker identifiers enabling classification of trades executed through institutional and retail brokers, the author investigates all trades submitted on the Australian Securities Exchange over the period of December 2007 to December 2014. The author identifies a rapid, asymmetric, price adjustment to the announcement, which is larger when the target rate decision results in lower-than-expected rates, and is accompanied by a sharp increase in market activity. Institutional brokers tend to execute trades more quickly following the announcement, and target more liquid large-cap stocks. Trades executed through institutional brokers appear to be more profitable, although profits are concentrated in buy trades. The evidence supports the notion that institutional investors have an advantage in processing the news resulting from target rate decisions.
AB - The author examines the patterns of trading behavior in the period surrounding monetary policy announcements. Utilizing a high-frequency dataset, with broker identifiers enabling classification of trades executed through institutional and retail brokers, the author investigates all trades submitted on the Australian Securities Exchange over the period of December 2007 to December 2014. The author identifies a rapid, asymmetric, price adjustment to the announcement, which is larger when the target rate decision results in lower-than-expected rates, and is accompanied by a sharp increase in market activity. Institutional brokers tend to execute trades more quickly following the announcement, and target more liquid large-cap stocks. Trades executed through institutional brokers appear to be more profitable, although profits are concentrated in buy trades. The evidence supports the notion that institutional investors have an advantage in processing the news resulting from target rate decisions.
KW - Institutional brokers
KW - Monetary policy
KW - Reserve Bank of Australia
KW - Retail brokers
KW - Stock market
KW - Trading behavior
UR - http://www.scopus.com/inward/record.url?scp=85038869581&partnerID=8YFLogxK
U2 - 10.1080/15427560.2018.1405007
DO - 10.1080/15427560.2018.1405007
M3 - Article
AN - SCOPUS:85038869581
VL - 19
SP - 365
EP - 380
JO - The Journal of Behavioral Finance
JF - The Journal of Behavioral Finance
SN - 1520-8834
IS - 4
ER -