2. Agenda
• Market structure
• Trading
– Trading techniques
– Strategy
• How to pick good stocks
– Academic
– Industry practice
– Portfolio management
• Case study
• Q&A
7. Investor Trader
More focused on long-term goals More focused on short-term profits
Use different techniques including shorts
Usually buy and hold
& derivatives
Usually want to participate in corporate Most likely aim at profits from stock price
governance movement
9. Trading Orders
Limit Order B/S Ticker Price
Matching priority
• Price
• Time
Market Order B/S Ticker
Matching priority
Why do
• Time
people
Order racing submit MO?
13. Factors
Correlation with index portfolio
Dividend yield
Momentum
Size Book to market ratio
Credit trustworthy
Asset growth
Leverage
Product life cycle
Industry growth
Price on earning
Quality of information disclosure
Cash ratio
14. Fundamental Analysis
• Look into the firm's financial statement,
management, future business prospects
• Analyze macroeconomics, industry, competitors
• Forecast future stock price using KPI as input
15. Technical Analysis
• Believes that stock prices move in patterns. Try to
identify the pattern in near future. Primarily
concern price & volume.
16. High-frequency trading
• Use sophisticated trade automation. Trade on rapid
basis.
• Monitors the market for unusual movement, then
captures the opportunities.
• Best for arbitrage.
20. Bibliography
• Bodie, Kane, Marcus, 'Investments', 9e, McGrawHill, 2011
• Frino, Segara, 'Trade Execution, Arbitrage and Dealing in Australia', Pearson
Prentice Hall, Sydney, Australia, 2008
• Lewis, 'The Big Short: Inside the Doomsday Machine', W. W. Norton &
Company, 2011
• Taleb, 'Fooled by Randomness: The Hidden Role of Chance in Life and in the
Markets', Random House, 2008
• Holtahusen, R., Leftwich, R., and D. Mayers, 1987, The effect of large block
transactions on security prices: A Cross sectional analysis , Journal of
Financial Economics 26, 237-267
• Chan, L.K.C., and J. Lakonishok, 1993, Institutional Trades and Stock Price
Behaviour, Journal of Financial Economics 33, 173-199
• Admati, A.R., and P.Pfleiderer, 1988, A theory of intraday patterns: Volume
and price variability, Review of Financial Studies 1, 3-40
• Chan, K.C., W.G. Christie and P.H. Schultz, 1995, Market Structure and
Intraday Pattern of bid Ask Spreads for NASDAQ Securities, Journal of
Business 68, 35-60