PUBLISHED
1- High Frequency Correlation Dynamics and Day-of-the-Week Effect: A score-Driven Approach in an Emerging Market Stock Exchange. 2022. International Review of Financial Analysis, (with Cenk C. Karahan), 80, 102008
2- Epps Effect still existent: Differing unconditional correlation behaviors for inter-sector stock pairs. 2020. International Journal of Disciplines Economics & Administrative Sciences Studies, 6(24), 797-805
WORKING PAPERS
1-Dark Side of the Day: Overnight Price Jumps and Short-Term Return Predictability
(with Lammertjan Dam & Halit Gonenc)
Abstract
Using 9,283 stocks listed on NYSE, AMEX, and NASDAQ, we identify investor overreaction to overnight information shocks and find that cumulative overnight jump returns negatively predict cumulative short-term returns in positive and negative episodes. In contrast to this overreaction, a zero-cost contrarian trading strategy with extreme decile portfolios -shaped according to lagged jump returns- incurs 0.6% of risk-adjusted loss in a 1-month investment horizon. Together, these connote that documented overreaction and return reversal are short-term market phenomena, and achieving price discovery entails not only the information but also active market environment.
2– Day and Night Expected Returns Under Overnight Information Shocks: New Tug-of-War Pattern
Abstract
This study examines the persistence in overnight and intraday return components in the light of overnight price jumps with a very large dataset of stocks listed on NYSE, AMEX, and NASDAQ. Factoring in overnight information shocks uncovers economically and statistically different tug-of-war patterns for day and night return components. When stocks are sorted according to their monthly cumulative overnight returns, a zero-cost portfolio trading strategy yields a 3.9% lower risk-adjusted return for the overnight segment in jump stocks while the same strategy results in a 4.4% smaller loss during the intraday period in the following month.
3-Market Ambiguity and Mispricing in S&P500 Futures Contracts
(with Cenk C. Karahan)
Abstract
We empirically unveil the effect of having multiple priors on asset mispricing in the market where mean-variance optimization and Bayesian approach do not have any say. We show that the level of mispricing in S&P500 E-Mini futures contracts is also linked to the degree of prevailing market ambiguity. Crucial findings are in order: First, our study unearths how different levels of Knightian uncertainty impact the direction and level of mispricing in US futures markets. Second, profound analysis reveals an asymmetric outlook for episodes of market euphoria and unrest. Third, we identify the primary channels through which the ambiguity permeates the market. Findings are robust to different ambiguity measurement techniques. Extant literature on marred prospects and market implications rests heavily on experimental data. This study expands recently burgeoning thin literature that is built upon market data.
PS: We are now focusing on the main drivers of futures markets. Hazelkorn et al. (2023) show that liquidity demands from different market actors shape futures-cash basis. In a similar fashion, we are currently compiling data from the Commodity Futures Trading Commission to work on the supply & demand dynamics and cross-market activities of different clientele.
ONGOING
1‑ Solving Idiosyncratic Volatility Puzzle: Discrete vs Continuous Information Flows
2- Discontinuity-induced Circuit Breaker and Price Efficiency in Stock Markets
3- Invisible Hand on Correlations: Portfolio Rebalancing