Hey ya'll, hope everything is doing well and your trading performance is reacting positively. I'm working on a research project right now and I'm kind of stumped. I'm trying to figure out how to calculate the volume (amount of shares) necessary to move a stock by a certain dollar amount. My project is pertaining to market manipulation in thinly traded securities like OTC penny stocks, small cap companies, thinly traded derivatives and so on. Maybe someone can point me in the right direction. Right now I just printed out a research report by Philipp Weber and Bernd Rosenow on "Large stock price changes: volume or liquidity?". I'm reading through the report right now and taking notes, but it still doesn't answer my question... How to calculate the volume (amount of shares) necessary to move a stock by a certain dollar amount? Let me know if anyone can help, I'll be online all night trying to finish this research! THANKS EVERYONE
guys poke around for liquidity holes.. or they time big orders coming in to front run... liquidity can dry up in seconds and it can take one trade to cut a stock in half... things to look up.. liquidity holes.. micro structure market depth.. etc.. http://en.wikipedia.org/wiki/Market_depth
most of the guys own what they call "rooms" or call rooms where they do stock promotion.. alot of guys get in trouble because they have tons of shares that are linked to them and they are pumping the stock up to the public and selling them their shares directly ... i go to the local starbucks and theres a guy driving a nice porsche with the tag stoxx on it.. i asked him if he traded.. he said he was a stock promoter.. .. thats what they call themselves.. stock promoters.. the get deals like restricted or unrestricted stock for getting people to buy.. the promotors can get jacked as well cause they can sell the penny stock down to nothing and have no one to sell it to. http://en.wikipedia.org/wiki/Microcap_stock_fraud http://www.sec.gov/news/press/2012/2012-39.htm
http://arxiv.org/pdf/cond-mat/0401132v1.pdf Research report I'm reading called, "Large Stock Price Changes: Volume or Liquidity ?" by Weber and Rosenow. Maybe it'll also help..
Three academic papers you may want to look at - Amihud (2002), Pastor and Stambaugh (I forget the year), and Chordia Roll and Subrahmanyam (2005). The Amihud and P&S methods are crude to avoid using intraday data and trade signing, but get close to estimating how much volume it takes to move a stock. The CRS paper uses order imbalances to predict future returns, I think this is the closest to what you would want to do - probably replace future return with current return and replace their -1 to 1 measure of imbalance with the dollar imbalance.
Are these the ones? Amihud (2002) http://www.cis.upenn.edu/~mkearns/finread/amihud.pdf Pastor and Stambaugh (I forget the year) http://papers.ssrn.com/sol3/papers.cfm?abstract_id=279804 Chordia Roll and Subrahmanyam (2005) http://www.rhsmith.umd.edu/finance/pdfs_docs/seminarfall05/Subrahmanyam.pdf
Just touching base a few months down the line... did your research project reach fruition? Are there any results you can share here?