Essays on the Behavior of Agents in Financial Markets

Kopřiva, František

In the first chapter, I focus on the extent of information-driven trading originating from order flows to capture the behavior of the market makers on an emerging market. With my supervisor, we modified the classical Easley et al. (1996) model for the probability of informed trading using a jackknife approach in which trades of one particular market maker at a time are left out from the sum of all buys and sells. Using the estimates from the jackknife approach, for each market maker we test whether the order flows associated with the particular market maker behaved significantly different from the others. Data from the Prague Stock Exchange SPAD trading platform are used to demonstrate our methodology. Finding significant differences in the probability of informed trading computed from order flows, we conclude that order flows could reveal the extent of information-driven trading and could potentially be used by regulatory authorities to identify the suspicious behavior of market participants. In the second chapter I analyze the potential conflict of interest between associated analysts and brokers. In contrast to the existing literature, with my supervisor, we do not analyze prediction accuracy and/or biases in analyst recommendations. Instead we focus our analysis on brokers and examine whether...

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