Editor’s Letter

We open the Winter issue with a commentary from Jaeger where he uses the torque and horsepower of a car as an analogy for market liquidity in order to illustrate the importance of contrarian investing. This is followed by Wadhwa and Panageas, who analyze the most attractive sources of risk-adjusted carry. With investors forced to invest cash at extremely low-yield levels, they believe those to be good alternatives. Gagnon examines news-trading systems and proposes a rules-based approach to optimize them by screening the events by a limited number of relevant text and data analysis algorithms. Next, Rashkovich proposes a method for measuring trader performance with consideration for the risks the trader takes. Those risks are not currently part of the performance analysis.

Jain and Wang study the credit rating of a firm’s bond, the associated changes in institutional trading in a firm’s stock, and the profitability of those trades finding that trades consistent with credit-rating changes are more profitable than those consistent with equity analysts’ recommendations. Next, we have an analysis by Bacidore, Polidore, Xu, and Yang on trading volume, closing auction imbalances, and price reactions to imbalances and their discussion of how traders can use those findings when trading in and around the closing auction. Amid the large amount of information, Vuorenmaa discusses the positive and negative aspects of high frequency trading. We conclude this issue with Manchi and Leman’s examination of the trading options available for the many asset classes available.

As always, we welcome your submissions. Please encourage those you know who have good papers or have made good presentations on trading-related subjects to submit them to us. Submission guidelines are included in this issue. We value your comments and suggestions so please email us at journals{at}investmentresearch.org.

Brian Bruce

Editor-in-Chief

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