Dear colleagues,
You are kindly invited to attend the following VGSF research seminars:
***Seminar 1: Delegated Asset Management and Market Segmentation ***Speaker: Wei Xiong (Princeton University) ****Time: 2008-04-23, Wednesday, 15:30-17:00 !!!* ***Location: 1190, Heiligenstädter Strasse 46-48, seminar room 1 (ground floor) (WU-H46)
***Seminar 2: Day Trading in Equilibrium ***Speaker: Terrance Odean (Haas School of Business, Berkeley) ***Time: 2008-04-25, Friday, 15:30-17:00 ***Location: 1190, Heiligenstädter Strasse 46-48, seminar room 1 (ground floor) (WU-H46)
The paper to be presented by Terrance Odean can be downloaded at http://www.vgsf.ac.at/activities/seminars.htm. The abstracts are attached below.
Please note that the special time for the first seminar of this week. Please also be informed that from now on VGSF research seminars will only be announced through the VGSF newsletter. You are kindly invited to subscribe to the VGSF newsletter at https://lists.wu-wien.ac.at/mailman/listinfo/vgsf-newsletter if you have not yet done it.
Wei Xiong will be available for individual meetings on Wednesday, and Terrance Odean will be available on Friday afternoon before the seminar. If you would like to talk to them in person, please contact me as soon as possible.
Best regards,
Youchang Wu
Abstract 1: This paper explains capital immobility in financial markets based on agency frictions in delegated asset management. Our key insight is that confining a fund to investing in a single market increases the efficiency of incentive provision to the fund manager through benchmarking and reduces the agency cost. We show that this benefit can dominate the cost of forgone investment gain due to restricted investment choices, and therefore provide a justification of capital confinement provisions commonly specified in asset management contracts. Our model offers a new perspective on liquidity crises. After investors distribute their capital into different market segments through institutionally managed funds, agency considerations can largely confine capital within its initial market segments, thus refraining liquidity from flowing down to a distressed market.
Abstract 2: When an investor buys and sells the same stock on the same day, he has made a day trade. We analyze the performance of day traders in Taiwan. Day trading by individual investors is prevalent in Taiwan – accounting for over 20 percent of total volume from 1995 through 1999. Individual investors account for over 97 percent of all day trading activity. Day trading is extremely concentrated. About one percent of individual investors account for half of day trading and one fourth of total trading by individual investors. Heavy day traders earn gross profits, but their profits are not sufficient to cover transaction costs. Moreover, in the typical six month period, more than eight out of ten day traders lose money. Despite these bleak findings, there is strong evidence of persistent ability for a relatively small group of day traders. Traders with strong past performance continue to earn strong returns. The stocks they buy outperform those they sell by 62 basis points /per day/. This spread is sufficiently large to cover transaction costs.