Stock splits: Implications for investor trading costs

Stock splits are known to have a negative effect on market quality—while stock prices adjust consistently with the split's scale, the bid/ask spread and market depth do not. Two possible explanations for the relative increase in spread are that (i) splits cause an increase in market maker costs that are passed along to investors or (ii) splits provide a mechanism for market makers to increase excess profits. Using a robust econometric methodology, we find evidence of the latter, which raises questions about the motivation of the splitting practice. We also document that while NASDAQ spreads appear to adjust more fully than those of NYSE/AMEX stocks, NASDAQ spreads are higher in general.

System for foreign exchange trading using genetic algorithms and reinforcement learning

Foreign exchange trading has emerged recently as a significant activity in many countries. As with most forms of trading, the activity is influenced by many random parameters so that the creation of a system that effectively emulates the trading process will be very helpful. A major issue for traders in the deregulated Foreign Exchange Market is when to sell and when to buy a particular currency in order to maximize profit. This paper presents novel trading strategies based on the machine learning methods of genetic algorithms and reinforcement learning.

'Seeing the market': Technical analysis in trading styles

Whilst financial markets are not strangers to academic and professional scrutiny, they still remain epistemologically contested. For individuals trying to profit by trading shares, this uncertainty is manifested in the varying trading styles which they are able to utilize. This paper examines one trading style commonly used by non-professional share traders-technical analysis. Using research data obtained from individuals who identify themselves as technical analysts, this paper seeks to explain the ways in which individuals understand and use the technique in an attempt to make trading profits. In particular, four distinct subcategories or ideal types of technical analysis can be identified, each providing an alternative perceptual form for participating in financial markets. Each of these types relies upon a particular method for seeing the market, these visualization techniques highlighting the existence of forms of professional vision (as originally identified by Goodwin (1994)) in the way the trading styles are comprehended and acted upon.