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This paper provides the first study of foreign investors’ trading in a sizeable European emerging stock market, using a combination of daily and monthly complete data collected at the destination. It also introduces the structural conditional correlation (SCC) methodology to identify the contemporaneous interaction between foreign flows and returns. We show that global emerging market returns are an additional driver of foreign flows after controlling for global developed market returns. Foreigners do negative (positive)-feedback-trade with respect to local returns at the monthly (daily) frequency. SCC methodology shows that the standard assumption in the literature that flows cause returns but not vice versa is not justified even at the daily frequency, making price impact estimates reported in previous literature questionable.

TEKNİK ANALİZ'İN TEORİSİBİRLEŞTİRİCİ BİR YAKLAŞIM ÖNERİSİ VE İLK AMPİRİK TESTLERİÖZETTeknik Analiz'in (TA) akademik algılamasında iki ana sorun, gerçek hayattaki TA uygulamasını iyi temsil etmeyen performans testleri ve TA'in öngörü gücünü açıklayan bilimsel bir genel teorinin eksikliği olarak tespit edilmiştir. Bu iki eksikliğin, literatürde mükerrer olarak dile getirilmiş olmasına rağmen, halen giderilememiş olduğu görülmektedir. Bu çalışmada, geniş kapsamlı bir literatür araştırmasına dayanarak, TA'in öngörü gücünü açıklayıcı genel bir teori oluşturulmuştur. Bu teorinin ürünü olan ve, literatürde ilk kez, birden fazla TA kuralını ve grafikleme frakansını birarada kullanan bir TA sistemi geliştirilmiş; ve teorinin geçerliliğini ölçmek üzere, gerçek zamanlı bir uygulamayla test edilmiştir. Ayrıca, teknik sistemin sinyalleri piyasaya bilgi akışı ile karşılaştırılarak, TA'in öngörü gücünün kaynağı doğrudan araştırılmıştır. Gerçek zamanlı test ve teknik sinyallerin bilgi akışı ile karşılaştırılması metodolojileri akademik literatürde ilk kez uygulanmaktadır. Sonuçlar, oluşturulan teorinin implikasyonlarını kuvvetle desteklemektedir. Bu çalışmayla akademik görüş ile sektör uygulaması arasındaki uyuşmazlığın, TA'in bilimsel bir açıklaması yapılmak suretiyle giderilmesi hedeflenmektedir. Geçmişteki akademik görüşlerin tersine, Teknik Analiz, uninformed ve informed piyasa katılımcıları arasındaki bilgi asimetrilerini azaltma işlevini yerine getirmektedir. THE THEORY OF TECHNICAL ANALYSISA COHESIVE APPROACH AND ITS PRELIMINARY EMPIRICAL TESTS ABSTRACTTwo major gaps in the academic study of Technical Analysis (TA) are performance tests of overmechanized technical rules that do not properly represent industry practice of TA and the lack of a cohesive theory to explain the source of its predictive power. Although these gaps have been mentioned in academic literature years ago and several times, no academic work is observed to satisfactorily fill them. In this dissertation, which aims at closing these two gaps, a descriptive theory to explain TA is formulated, based on the synthesis of a wide literature review. Then, a technical trading system, derived from this theory, is tested in a real-time trading experiment to assess the validity of the theory. For the first time in the literature, multiple technical rules and multiple charting frequencies are combined. Moreover, returns to our technical strategy is matched with the history of information flows to gain insight into the source of its profitability. This, along with the real-time test methodology, is a "first" in the literature. Results provide strong support for the theory's implications. Overall, the study seems to close the gap between academics and practice by providing a scientific understanding of TA. In contrast to some earlier academic views, TA is a technique that informs, with some delay and noise, the uninformed, who has otherwise no opportunity to acquire more than stale fundamental information.

This article presents the first tests of technical trend-following rules (TTRs) and the 52-week high strategy in individual corporate bonds, along with comparisons to corresponding stocks. Over the 2002-2015 period, TTR and the 52-week strategy are unprofitable in both bonds and stocks. Short legs of these trend-following strategies lead to significant losses in corporate bonds, which can be interpreted as evidence of bond investors' overreaction to bad news. Thus, short-term contrarian strategies, the profitability of which is viewed as the reward to liquidity provision, are more rewarding in corporate bonds. TTR buy signals can predict lower-volatility days in bonds as in stocks, despite the low/negative return correlations between the two. Refereed/Peer-reviewed

We show that Hau and Rey's (2006) empirical evidence is not sufficient to support their risk-rebalancing theory as an explanation for the negative correlation between the stock market return differential and currency. A simple model combining home-wealth rebalancing and extrapolative expectations on the foreign stock predicts this negative correlation only when the host market is a source of international capital. Panel regressions indicate that the source status of the economy (i.e., whether it is a net receiver or source of international capital) is a main predictor of the stock return differential-currency correlation. Refereed/Peer-reviewed

We study stock market's response to real output shocks in the small and young Eastern European frontier markets, and compare to the larger European emerging- and world's most developed markets. To obtain a complete time profile of stock market's response, we use a Vector Auto-regression with Asymmetric Leads (VARwAL) model, which is a special case of the mix (noncausal) VARs. Results confirm its efficacy: in every country, both the forward-looking and delayed components of stock market's response are significant. Stock market returns forecast future real output equally well in Eastern European frontier markets as in developed and larger-emerging markets. The distant-horizon forward-looking response is larger in frontier markets, whereas the near-horizon forward-looking response is larger in developed markets. Refereed/Peer-reviewed

We introduce the structural conditional correlation (SCC) methodology to the foreign flows literature to identify the contemporaneous return-flow interaction and provide new evidence using the first daily data from a sizeable European emerging market and comparing to Asian markets. SCC results indicate significant bilateral intraday interaction between net foreign flows and market returns, and the presence of their latent common drivers. Allowing for these effects alters previously uniform results of positive feedback trading for some Asian markets, as well as the price impact estimates. Foreigners display a sluggish response to global information, which cannot be attributed to their information disadvantage. Refereed/Peer-reviewed

This paper elaborates an interesting aspect of the Monday anomaly: Monday returns are relatively more likely to reverse over the subsequent days. We document that, although the Monday low-return anomaly disappeared, the subsequent reversal of Monday returns remains robust to date. The reversals, measured over a five-day horizon, are pervasive across international stock markets, reasonably stable over time, significant following both positive and negative Monday returns, and not confined to extreme Monday returns. Trading strategies designed to exploit these reversals earn economic profits. We examine potential explanations for the reversal of Monday returns using trading flows data of investor types from Korea. All predictions of the Foster and Viswanathan [J. Finance, 1993, 48, 187–211] model are confirmed: volatility is higher, trading volume is lower, market depth is lower and price impact costs are higher on Mondays. The model implies lower price quality on Mondays, but does not specifically predict reversal of Monday returns. We show that the trading intensity of international/institutional investors is lower on Mondays. This appears to make the market relatively more susceptible to individual investors’ trading, which is negatively correlated with international/institutional investors. Thus, Monday returns are relatively more likely to reverse during the subsequent days of the week when institutional investors trade more aggressively. Refereed/Peer-reviewed

We propose a vector autoregression with asymmetric leads model to combine the forward-looking, contemporaneous, and delayed responses of the stock market to output news. Using this approach, we document that the stock market's connection to real output, shown by Binswanger to have been broken since the early 1980s, has been restored after 1998, however, via a delayed response. Subperiods mainly differ in terms of delayed response, portraying an interesting evolution of market participants' response to macroeconomic information based on the realized persistence of output shocks. Refereed/Peer-reviewed