Leslie Boni

Analysts, Industries, and Price Momentum

This paper examines the value of analysts as industry specialists. We show analysts create value in their recommendations mainly through their ability to rank stocks within industries. An industry-based recommendation strategy substantially improves the return to risk ratio and reduces price momentum tilt relative to portfolios that ignore industry information. An examination of the links among analyst information, aggregated at the industry level, and industry returns and industry momentum shows that industry returns precede industry-aggregated analyst upgrades and downgrades, and the short-term industry price momentum phenomenon is partly explained by returns of firms with more analyst coverage leading those with less in that industry. Recommendation information is not valuable for predicting future relative industry returns, however.

Supply Contraction and Trading Protocol: An Examination of Recent Changes in the U.S. Treasury Market

We investigate liquidity and trader behavior in the U.S. Treasury market during recent supply contractions. As in the precontraction period, dealers employ expandable order strategies to achieve greater-than-posted depth at the posted price and use expandable orders more often when expected information asymmetry is greater. Overall, however, dealers are less likely to discover greater-than-quoted depth during the supply contraction regimes. We find that, even after substantial losses in their market share of coupon Treasury trading, brokers reporting voice-brokered trading through GovPX provide an important protocol for depth discovery.We investigate liquidity and trader behavior in the U.S. Treasury market during recent supply contractions. As in the precontraction period, dealers employ expandable order strategies to achieve greater-than-posted depth at the posted price and use expandable orders more often when expected information asymmetry is greater. Overall, however, dealers are less likely to discover greater-than-quoted depth during the supply contraction regimes. We find that, even after substantial losses in their market share of coupon Treasury trading, brokers reporting voice-brokered trading through GovPX provide an important protocol for depth discovery.

Dark Pool Exclusivity Matters

Recent dark pool proliferation has magnified regulatory and academic concerns about equal access and market quality implications. Some dark pools, hoping to create an environment more amenable to buy-side institutional investors, craft their rules to discourage – or even exclude – brokers, high frequency traders and order-flow-information traders. We examine the role participation constraints play in large trade execution and find that a dark pool targeting buy-side counterparties experiences less serial correlation in returns, less volume and volatility increase pre-trade, and more trade clustering within and across days. Exclusivity influences execution quality. Not all dark pools are created equal.

Are Short Sellers Superior Traders

Using two practitioner measures of intraday trading skill, Boni and Rosen show that short sellers are little or no better than the average trader. Using the first measure, the authors find that short sellers beat the day’s volume-weighted average price by 4 basis points, or about 1.3 cents per share, on average. Using the second measure, the Kissell and Glantz [2003] relative performance measure, they find that short sellers are not measurably better than average. With the exception of short sales of stocks on the SEC’s September 18, 2008, Emergency Order ban list, the authors’ findings are robust for the different short-sale regulatory regimes that existed during the third quarter of 2008.

Grading Broker Algorithms

Institutional trading desks often have accounts with multiple brokers, each offering one or more flavors of the workhorse algorithms: Implementation Shortfall, VWAP, and Volume Participation. The challenge for many traders has become not only which algorithm to use but also whose algorithm to use.