Felix Fritz

Trading Heuristics in Financial Markets: Technical Analysis and Round Number Effects

In the thesis the relation between dimensions of market quality and investment heuristics as well as round number biases is analyzed. This relation is assessed on the basis of empirical analyses of Technical Analysis and limit order clustering as well as buy-sell imbalances around round numbers. The thesis considers the German stock market and the retail investment market for structured products.

Technical Analysis, Liquidity, and Price Discovery

Academic literature suggests that Technical Analysis (TA) plays a role in the decision making process of some investors. If TA traders act as uninformed noise traders and generate a relevant amount of trading volume, market quality could be affected. We analyze moving average (MA) trading signals as well as support and resistance levels with respect to market quality and price efficiency. For German large-cap stocks we find excess liquidity demand around MA signals and high limit order supply on support and resistance levels. Depending on signal type, spreads increase or remain unaffected which contradicts the mitigating effect of uninformed TA trading on adverse selection risks. The analysis of transitory and permanent price components demonstrates increasing pricing errors around TA signals, while for MA permanent price changes tend to increase of a larger magnitude. This suggests that liquidity demand in direction of the signal leads to persistent price deviations.

Price Clustering and Round Number Effects - Evidence from the German Market

Price clustering was found to be a major artifact of securities trading over many decades. In the literature several conjectures about the origin of these effects have been put forward. However, most explanations are not applicable anymore since today a great share of the trading activity is due to automated trading systems which are assumed to be unaffected by any number bias. I analyze round number effects in the German market and thereby contribute to existing literature by showing that round number effects are also present in the Germany, but exhibit local stylized facts. Further, new determinants of round number effects are identified. In accordance with increasing algorithmic trading activities the strength of effects is decreasing over the observation period. On the other hand, an analysis of retail investor trading reveals that the magnitude of human round number biases remains stable over time and is mainly induced by the usage of limit orders.

Validierung eines Simulationsmodells für Wälzlager durch Abgleich von Simulations‐ mit Messdaten

Walzlager besitzen abhangig von Drehwinkel und Belastung unterschiedliche Steifigkeit sowie Dampfungs- und Reibverluste. Um das dynamische Verhalten und die Lebensdauer einer Maschine durch Simulationen zu beurteilen, werden daher die nichtlinearen Reaktionskrafte des Lagers als generisches Maschinenelement implementiert. Um die Gute dieses Elements zu validieren werden verschiedene Messungen an einem Walzlagerprufstand durchgefuhrt. Anschliesend wird ein Modell dieses Prufstandes in MSC/ADAMS aufgebaut und zum Abgleich die Experimente als Simulationen nachgebildet. Die untersuchten Grosen sind die Lagersteifigkeit sowie das Reibmoment im Walzlager. (© 2010 Wiley-VCH Verlag GmbH & Co. KGaA, Weinheim)