Volume-Synchronized Probability of Informed Trading (VPIN), Market Volatility, and High-Frequency Liquidity

We assess the predictive ability of three VPIN metrics on the basis of two highly volatile market events of China, and examine the association between VPIN and toxic-induced volatility through conditional probability analysis and multiple regression. We examine the dynamic relationship on VPIN and high-frequency liquidity using Vector Auto-Regression models, Granger Causality tests, and impulse response analysis. Our results suggest that Bulk Volume VPIN has the best risk-warning effect among major VPIN metrics. VPIN has a positive association with market volatility induced by toxic information flow. Most importantly, we document a positive feedback effect between VPIN and high-frequency liquidity, where a negative liquidity shock boosts up VPIN, which, in turn, leads to further liquidity drain. Our study provides empirical evidence that reflects an intrinsic game between informed traders and market makers when facing toxic information in the high-frequency trading world.

Profitable opportunities around macroeconomic announcements in the U.S. Treasury market

This thesis studies the impact of macroeconomic announcements on the U.S. Treasury market and investigates profitable opportunities around macroeconomic announcements using data from the eSpeed electronic trading platform. We investigate how macroeconomic announcements affect the return predictability of trade imbalance for the 2-year, 5-year, IO-year U.S. Treasury notes and 30-year U.S. Treasury bonds. The goal of this thesis is to develop a methodology to identify informed trades and estimate the trade imbalance based on informed trades. We use the daily order book slope as a proxy for dispersion of beliefs among investors. Regression results in this thesis indicate that, on announcement days with a high dispersion of beliefs, daily trade imbalance estimated by informed trades significantly predicts returns on the following day. In addition, we develop a trade-imbalance based trading strategy conditional on dispersion of beliefs, informed trades, and announcement days. The trading strategy yields significantly positive net returns for the 2-year T-notes.

The Impact of a Corporate Name Change on Stock Price and Trading Volume of Canadian Companies

This thesis examines the impact of a corporate name change on stock price and trading volume of Canadian companies around the announcement date, the approval date, and the adoption date over the time period from 1997 to 2011. Name changes are classified into six categories: major and minor, structural and pure, diversified and focused, accompanied with a change in ticker symbol and without a change in ticker symbol, “Gold” name addition and deletion, and different reasons for name changes (e.g., merger and acquisition, change of structure, change of strategy, and better image). The thesis uses the standard event study methodology to perform abnormal return and trading volume analyses. In addition, regression analysis is employed to examine which type of a name change has the largest impact on cumulative abnormal returns. Sample stocks exhibit a significant positive abnormal return one-day prior to the approval day and one day after the adoption date. Around the approval date we observe significant abnormal returns for stocks with a structural name change. On the day after the adoption date we document abnormal returns for stocks with major, minor, structural, pure, focused, and ticker symbol name changes. If a merger or acquisition is the reason for a name change, companies tend to experience a significant positive abnormal return one-day before the approval date and on the adoption date. If a change of structure is the reason for a name change, companies exhibit a significant positive abnormal return on the approval date and a significant negative abnormal return on the adoption date. In case of a change of strategy as the reason for a name change, companies show a significant negative abnormal return around the approval date and a significant positive abnormal return around the adoption date.

Trading nitrogen for carbon: Nitrogen and carbon translocation in a plant/fungal (Metarhizium spp.) symbiosis

While nitrogen is critical for all plants, they are unable to utilize organically bound nitrogen in soils. Therefore, the majority of plants obtain useable nitrogen through nitrogen fixing bacteria and the microbial decomposition of organic matter. In the majority of cases, symbiotic microorganisms directly furnish plant roots with inorganic forms of nitrogen. More than 80% of all land plants form intimate symbiotic relationships with root colonizing fungi. These common plant/fungal interactions have been defined largely through nutrient exchange, where the plant receives limiting soil nutrients, such as nitrogen, in exchange for plant derived carbon. Fungal endophytes are common plant colonizers. A number of these fungal species have a dual life cycle, meaning that they are not solely plant colonizers, but also saprophytes, insect pathogens, or plant pathogens. By using 15N labeled, Metarhizium infected, wax moth larvae (Galleria mellonella) in soil microcosms, I demonstrated that the common endophytic, insect pathogenic fungi Metarhizium spp. are able to infect living soil borne insects, and subsequently colonize plant roots and furnish ts plant host with useable, insect-derived nitrogen. In addition, I showed that another ecologically important, endophytic, insect pathogenic fungi, Beauveria bassiana, is able to transfer insect-derived nitrogen to its plant host. I demonstrated that these relationships between various plant species and endophytic, insect pathogenic fungi help to improve overall plant health. By using 13C-labeled CO2, added to airtight plant growth chambers, coupled with nuclear magnetic resosnance spectroscopy, I was able to track the movement of carbon from the atmosphere, into the plant, and finally into the root colonized fungal biomass. This indicates that Metarhizium exists in a symbiotic partnership with plants, where insect nitrogen is exchanged for plant carbon. Overall these studies provide the first evidence of nutrient exchange between an insect pathogenic fungus and plants, a relationship that has potentially useful implications on plant primary production, soil health, and overall ecosystem stability.