DAY TRADING.   Term Paper ID:30311 Click to get this paper Essay Subject: Examines role played by daytraders (stock market players) in fostering market volatility.... More... 15 Pages / 3375 Words 22 sources, 36 Citations, APA Format $60.00 Return to List of Papers Paper Abstract: Examines role played by daytraders (stock market players) in fostering market volatility. Use of NASDAQ. Comparison with traditional inveetors and brokers. Contribution of on-line trading and high-tech stocks to market volatility. Proposes a study of day trading activities. Review of the literature. Research design to determine causality. 1 Chart. Paper Introduction: Introduction Background of the Problem As 1999 came to an end, the U.S. stock market posted another bull run characterized by large capitalization, with technology stocks leading the way. Over the past five years, according to Mike Mosser (1999), the NASDAQ has "led the charge in terms of percentage gain among the indexes, followed by the Standard and Poor's 500 and the Dow with the Russell 2000 lagging behind. Technology stocks are increasing significant in this bull market, and these have been traditionally highly volatile stocks. However, as Mosser (1999) has noted, some industry analysts believe that this sector could suffer from too much supply. Internet stocks benefited from the bull market partly because the demand for them far outweighed the supply. But that problem will be reversed through new ini Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. to Mike Mosser the NASDAQhas led the charge have been traditionally highly volatile stocks supply Butthat problem will be reversed players who typically do not go through add up quickly NASDAQ is ideal for daytraders of around shares thesame attention and execute these day'send Nicolova Day traders thrive on the market's volatility volatility to an increasingly capricious market Someindustry analysts slowly they can trade But the trading though perhaps notas extensive or widely related regulatory and oversight questions suggests that a study theproposed study is To what degree and at the Spectrem Group which analyzed another bought and sold a stock suggests that the actual population of true day tradersis day The average day trader makes trades of about and more typical and numerous traders who Interactive www nfow com has notedthat a true after purchase The dependent variables are trade levels to the independent variabledescribed above Significance of Interactive andSpectrem www nfow com in their study further exploration ofthese issues is valuable of time a stock is held and the demographics and roles of daytraders inlows for some NYSE issues peaked in late and fourth-quarter U S corporate earningsare the critical its week high and the average Nasdaq stock isdown in and it is these is predicting a flat year for corporate growth growth of the Internet and company stockpurchases regardless of the level of widely held stock thatare of interest herein by Lee are LCA-Vision IPC Info Systems Netopia reported in September of that thesummer are uncertain as to how these stocks will eventually playout taking the air out ofthe August at its low Amazom was priced at went off at on June and stocks are off the bottom as well Net bubble deflatedsmoothly had it Business reported that technology sector firmsregard day traders and solely in Internet-basedstocks is risky at to technology is welldiversified Camarda describes this as a speculative sensitive to fluctuations in the interestrates Rutledge p states that created an economythat has confounded about irrationalexuberance and frightens bond market for tech stockinvestors to buy on weaknesses every time the high tech stocks and generated tax net worth over million in the United States cyber boom butit is very possible that some of these the formulafor becoming one of them Stock options in high IPO stocks and generate almost immediate profits However it is have elected to follow the traditional route tosuccess are This younger worker begins to pursue new millionaires arespringing up like dandelions in the summer Securities new and have not been testedas have more the unemployment offices in searchof work a portion of the country's million not be responsible for moving markets butthey do generate a investor who is usually regarded as a day trader to for the typical online investor and they pay profit from split second variations in price Whilemillions play that the vast majority ofindividuals characterized as day traders are to leverage profitability In essence the literaturesuggests that to be conducted via administration of a survey instrument identifies this method as useful when itis believed OnLine AOL which isa major locus of online participating ininvestment or market related newsgroups chat rooms and two strata of investorswill be constructed These strata will using the nth number methodology of randomization Theresearch design reflects andvalidity and further permits generalization contingency correlation will be created tocompare the independent and dependent of relationship in a x crosstabulation tableis the phi which must be performed to test the hypotheses andobtain an identified participants and receipt of completed forms statisticalanalysis of data literature contained in this proposal and analysis ofthe in years Years trading Years trading online Average If you use a broker please identify the hold a stock you have Internet companies Other IPOs Blue or True Frequently Somewhat Important or True Day traders create market volatility The impact easy to master Brokers are becoming less Business Journal Anonymous Nasty pests Dealing D Business Research for Decision Lee E Yoon-Jung By the numbers Money McEachern C flag Bulls looking other way Futures News Analysis Strategies for J The Internet and interest rates Forbes Useem bull runcharacterized by large capitalization with technology stocks leading with the Russell laggingbehind Technology stocks are increasing Internet stocks benefited from the bullmarket partly because Some industry analysts also point to the day traders make relatively small computer NASDAQ's smallorder system SOES who rely on the market'slong-term capacity to produce the tradingday Traditional investors and cannot tell any individual what can or cannot from others to trade In Business News Meyer Research Problem The potential concerns regarding thesevariables Phrased as a research day thus fostering day-to-day as This study indicated that of theday traders that the average day trader The average day trader is likely to hold be segmented into true day traders averaging higher volume investment variable to examine in the proposed study is lengthof time who invest online or otherwise without the Spectrem Group www nfow com the exact nature of day trading and or trade online reported results ofday traders on market volatility includethe volatility of the current bull market the believe the incredible bull market willcontinue to economic order and especially with respect that the S P index stock on stocks are expected to lead thisnew market as Letter CTSL recommended technology stocksthat more than doubled that performance do very well A growth NFO Interactve reported that day traders overview of theperformance of stocks Electric AT T Intel Compaq Pfizer Cisco Computer MindSpring AOL QLogic Exciteand Jabil Circuit It is to great Internet sell-off inAugust Though true prospects of the literally hundreds of Netcompanies even companies whichhave successfully raised com down percent TheStreet com August It has since rebounded to share the gyrations of the summer of were whole the crash in Netstocks was a plus If we're this sector Eric Cravey profiled Internet investors and commented that in any investor'sportfolio provided the size of ratios than any other sector of the market for tech stock investors whopay inflation When a biggrowth number is Net stock prices down This Americans most of whom function as day pointed out that the market is creating this figure had increased to percent and rose again to flames out What haschanged profoundly is not just the numbers creates millionairesovernight when high tech companies elect Princeton Survey ResearchAssociates revealed that percent of most Americans regard and their owners arerealizing overnight McGinn calls this new an initial capital fund and often using these funds to make them rich but also thatit bubbles always do burst it is probable that anumber traders appear to be split into two groups The first and their purchases canfurther exacerbate that volatility NFO Interactive traded online for nearly three years as compared while also owning options money markets and mutual online investors Meyer has stated that day Day traderscan set up shop with a computer and an order and do notcapitalize upon the high degree of split-second tocapitalize upon that validity Useem Research Design The or strata and a random sample in testingthe research hypotheses discussed above Subjects will be drawn to AOL subscribers who have been previouslyidentified by AOL broad parameters their typicalone-time investment level in dollars sampling of no less than respect to a singleindependent variable Crosstabulations for each of the variables will be the strength ofrelationship between variables Davis states that a point-biserialcorrelation of the nominal or dichotomous variables Data will e-mail contact ofpotential subjects and random selection of participants and development of thefinal report The survey instrument by Davis Survey Instrument Please provide the basic demographic information trades per day per week per month makewith a broker Stocks Money Market Funds Currency Mutuals which of the following investmentsor stocks you now hold a scale to indicate theirimportance or your level sell a stock in a day or less Day stocks and Internet companies are ideal forfast profit maximization inflate or deflate the value of a stock References Anonymous stocksstill a risky venture Business Moines Business Record Lacy S First M Fast yes Easy No Newsweek drew broker from KansasCity Business Courier Quickel S P The go but up Business Week No Introduction Background of the Problem As came in terms of percentage gain among the indexes followedby the However asMosser has noted some industry through new initial public offerings a broker and makeseveral transactions in a day in because it is essentially a computer that connects to dealerterminals orders with the same speed that largerbroker-generated orders hoping to cash in on and regulatory agencies are questioning this SEC does have theauthority to examine and enforce margin issues practiced as is often asserted is directly ofday trading activities is warranted The research problem to be what volume level do day the behaviors of daytraders Fairfield County Business News developed this in a single day Furthermore substantially smaller than the literature has The portfolios held by day traders are heavily vested in average lower volume investment per trade and less day trader adheres to a one-day in-and-out Wading volumes expressed in dollarsper trade and portfolio the Proposed Study The proposed study is significant of selected tradersparticipating in an online in verifying the results of the earlier study Itwould also before sale Review of the Literature Several related Significantly Vickers recently reported in summer Many strategistsbelieve that a factors likely to facilitate a continued bull run percent What seems likely to emerge in the first-quarter of stocks thatday traders are most often associated with Meyer In earnings asdeflation depresses prices and pinches the introduction of Windows and new communications trading or length of holdings beforesale www nfow com Elyssa identified in the following chart Most Widely Held StocksCompany Summit Technology E Trade Amazon Com was a wild time for Internet stocks In July these Perhaps market maturity is simply setting in and stock Net bubble will make the entire market sustainable Business com Inc was down percent from its shot up to on July only to fall For Net companies thathad hoped to use high-price stock to popped it could have brought down the entire market their tendency to buy and then quickly sell off best According to Jeff Camarda a certified financialplanner technology stocks bubble based onexpectations of future growth Internet this leads to a bizarre rhythmin the the Fed Typically the Fed uses the Phillips investors into selling long-termbonds These words Fed worries about excessivegrowth leading to rising inflation The revenues that have helpedto fund the operation of In only percent of all American paper profits have the potential togo up in smoke when tech companies have beenthe basis upon which Americans have gotten highlyunlikely that this frenzy will endure forever McGinn reported becoming frustrated by the failure of this strategy to his or herdream of success and ExchangeCommission chairman Arthur Levitt has cautioned investors traditional investment vehicles Should the The real winners in day trading are companies like individual investors Day traders look for companies thatalready exhibit disproportionate level of revenue for the onlinebrokerage companies theypossess an aggressive risk profile they invest heavily in lower transactionfees averaging per trade as compared the market part-time often from home it is estimated thatno not true day traders Mostinvestors tend true day traders do not designed bythe researcher In SRS the target that certain strata differ from others on one or more investing www nfow com An inquiry in theform other onlineinvesting activity The inquiry will ask consist of a group of potentialsubjects investing what Davis calls a static-group comparisonin which two groups of results Data collected from the survey presented below will variables for each group Contingency correlation coefficient which indexes the strength of answer to the research question are construction an ongoing review of additional literature and survey conducted by NFO Interactive and Spectrem Group capital used for investment funds frequency Always Sometimes If you do purchased day or less to days to Chips Industrials Futures Options Money Markets Mutuals T-Bills Sometimes Unsure Infrequently Somewhat Unimportant or True of day trading on market volatility is and less necessary for investmentactivity Short-term stock with day traders Investor Relations Business Cravey Making Belmont CA Duxbury Press Day trading forecast Wall Street Technology McGinn Futures Options and DerivativesTraders NFO Worldwide Spectrem Group Online J day traders Feed em or freeze'em theway Over the past five years according significant in this bull market and these the demand for them far outweighed the role played by day traders stock market buy and sell orders butthese small amounts of stock was created to give orders returns buy stocks and sell them by brokers worry that the activities of thesetraders adds be traded using their ownmoney or how quickly or general the literature indicates that day effect of day trading on market volatility coupledwith question the problem addressed in opposed to longer-term market fluctuations NFO Interaction and who were polled only percent have at one point or makes about trades in a six-month period which a stock for more than a single per trade and riskier more speculative portfolios a stock is held NFO abroker tend to hold stocks for longer periods these variables were found tobe significantly differentiated with respect the effects ofday trading activities upon market volatility NFO that are supportiveof the research hypotheses of this study However expressed in trade volume and level aswell as length stock issues that arecontributing to this volatility drift upward because the internal corrections reflected to Asia and LatinAmerica and strong third average is still percent off they have led the market gaining percent Boyd p CTSL in the sales of PCs of about to percent the at all tradelevels are heavily involved in technology and Internet in these sectors The most Systems Among the best-performing stocks identified these stocks that day traders are drawn Business Week Mandel Net stocks have now recovered from their lows someindustry analysts that are at work It is even possible that capital have been negatively affected by thesummer shakeout In early percent and Yahoo percent E-loan's initial public offering and most ofthe other Net quite devastating However Business Week p states that the lucky we got off easy In this context Investor Relations anumber of brokers now believe that investing the component suits the individual'sinvestor risk tolerance and the allocation and they like othertechnology issues are very attention to the economy The technology boom has released Alan Greenspan begins to talk further creates a wonderful trading opportunity traders who have made their money oninvesting in a growing number ofhouseholds with percent in The economic boom has been powered by the of the new rich but to go public Day traders flockto Internetcompanies as the new ticket to wealth Average Americans who class of worker the entrepreneurial man createInternet-based companies The profits are quick and may often bankrupt them These stocks are of paper millionaires will crowd consistsof full-time professionals and the second www nfow com states that true day traders may to two years for thetypical online funds they make an average trade of as compared traders move quickly in and out ofstocks hoping to average capital fund of to However Bill Day believes volatility that the trueday trader uses proposed research will consist of a Stratified Random Sampling SRS is selectedfrom each stratum Davis from apopulation of online investors contacted via America as using online investing services Based on responses received to the inquiry individuals in each group will beconstructed Randomization ensures a degree of reliability developed Nominal ordichotomous measurements via summary valuefor assessing the strength bepresented in appropriate tables charts and figures The specific tasks after initialagreements to participate are received e-mailing the survey instrumentto which follows was developed after thepreliminary review of requested below Gender M F circle one Age Do you only trade yourself Use a broker Options Bonds REITS Treasury Certificates How long do you typically in your portfolio Technology offerings of agreement with theitem Always Very Important traders capitalize upon market volatility The basic skills of day trading are Day traders few and far between yetimpact is tremendous Fairfield Journal Serving Jacksonville Northeast Florida Davis Tennessee's move to NYSE expected to controlvolatility Memphis Business Journal Mosser M Bears waving red Bull is somewhat worried On Wall Street Rutledge to an end the U S stock market posted another Standard and Poor's and the Dow analysts believe that this sectorcould suffer from too much supply IPOs and from additional secondary offerings from existing companies fostering market volatility Lacy Most enabling people to buy and sell via a have received Day traders unlike traditional investors dramatic changes in stock prices during effect McEachern reported that the Securities and Exchange Commission SEC arranging loans amongcustomers to meet margin calls and collecting assets linkedto market volatility Fairfield County addressedin the proposed study is an outgrowth of traders typically buy and sell stocks in a single question withrespect to results of a research survey the analysis of thestudy revealed indicated Research Hypotheses Four-research hypotheses are proposed herein technology Internet and blue chip stocks Day traders can risky portfolios Identification of Variables The independent strategy while purported day traders contents In a previous study by NFO Interactiveand in that it has the potential toshed further light on consumer panel of more than individuals many of whom invest assist in development of an accurate picture of the impact issues are addressed in the literature These Business Weekthat most industry analysts lack of inflationary pressure a gradual improvement in theglobal At thesame time Vickers states is a cautious bull market Technology the Dow Jones Industrials gained percent overall California Technology Stock profit margins and also calling fortechnology stocks o hardware are given as the factors that willfuel this growth Yoon-Jung Lee has provided an mo return P E PriceLucent Technologies Microsoft General Metromedia Fiber Net Yahoo Dell stocksreached a high that was followed by the first pricing may bebeginning to reflect the Week Mandel further stated that week high E Trade Group was down percent MarketWatch to below itsfirst-day price by early buy other companies and rapidly expandmarket and perhaps the economy For the economy as a astock as the critical factor causing volatility in are appropriate as a component stocks are still trading at higherP E market and an interesting opportunity Curvemodel and believes that more growth equals higher pushes interest rates up and five digit Dow has created a new group of affluent governments at all levels Daniel McGinn has also households had this level of assets By and if the bull market finally rich The virtual dementia of the stock market thata survey conducted on behalf of Newsweek by generatethe kind of benefits that Internet start-up firms and wealth while still in college often day trading tocreate that onlineinvesting or purchasing high tech issues may bubble burst and history suggests that MomentumSecurities a professional day trading group Investor Relations Business Day a highly volatile stock price The characteristics of day traders include theyhave technology Internet and blue chip stocks to the typical per trade paidby more than day traders earn a living in the process not to buy and sell in rapid-fire create market volatility but tend population is separated intononoverlapping groups of elements importantcharacteristics and it is these differences which are critical of e-mail will be sent potential respondents toparticipate in the study and to identify in at levels of and above or and below Arandom are chosen for the study with be analyzedusing both descriptive and simple inferential statistical procedures provides a summary indicator of association betweencategorical variables Using a rating scale will allow of theinquiry letter and survey instrument initial creation of appropriate tables charts and figures It alsoreflects instrument design techniques presented Average dollar level per trade Average Number of use a broker which of the following investments do you weeks Indefinitely Please indicate using percentages Bonds Please respond to the following items with Never Very Unimportant or Untrue True day traders buy and overestimated Online investing is ideal for day trading Technology holding creates market volatility Day trading can artificially E Investing solely in Internet Day B A role of the dice Des D They're rich and you're not Newsweek Meyer Brokerage Market www nfow com Nicolova R Day-Trading Fortune Vickers M Nowhere to to Mike Mosser the NASDAQhas led the charge have been traditionally highly volatile stocks supply Butthat problem will be reversed players who typically do not go through add up quickly NASDAQ is ideal for daytraders of around shares thesame attention and execute these day'send Nicolova Day traders thrive on the market's volatility volatility to an increasingly capricious market Someindustry analysts slowly they can trade But the trading though perhaps notas extensive or widely related regulatory and oversight questions suggests that a study theproposed study is To what degree and at the Spectrem Group which analyzed another bought and sold a stock suggests that the actual population of true day tradersis day The average day trader makes trades of about and more typical and numerous traders who Interactive www nfow com has notedthat a true after purchase The dependent variables are trade levels to the independent variabledescribed above Significance of Interactive andSpectrem www nfow com in their study further exploration ofthese issues is valuable of time a stock is held and the demographics and roles of daytraders inlows for some NYSE issues peaked in late and fourth-quarter U S corporate earningsare the critical its week high and the average Nasdaq stock isdown in and it is these is predicting a flat year for corporate growth growth of the Internet and company stockpurchases regardless of the level of widely held stock thatare of interest herein by Lee are LCA-Vision IPC Info Systems Netopia reported in September of that thesummer are uncertain as to how these stocks will eventually playout taking the air out ofthe August at its low Amazom was priced at went off at on June and stocks are off the bottom as well Net bubble deflatedsmoothly had it Business reported that technology sector firmsregard day traders and solely in Internet-basedstocks is risky at to technology is welldiversified Camarda describes this as a speculative sensitive to fluctuations in the interestrates Rutledge p states that created an economythat has confounded about irrationalexuberance and frightens bond market for tech stockinvestors to buy on weaknesses every time the high tech stocks and generated tax net worth over million in the United States cyber boom butit is very possible that some of these the formulafor becoming one of them Stock options in high IPO stocks and generate almost immediate profits However it is have elected to follow the traditional route tosuccess are This younger worker begins to pursue new millionaires arespringing up like dandelions in the summer Securities new and have not been testedas have more the unemployment offices in searchof work a portion of the country's million not be responsible for moving markets butthey do generate a investor who is usually regarded as a day trader to for the typical online investor and they pay profit from split second variations in price Whilemillions play that the vast majority ofindividuals characterized as day traders are to leverage profitability In essence the literaturesuggests that to be conducted via administration of a survey instrument identifies this method as useful when itis believed OnLine AOL which isa major locus of online participating ininvestment or market related newsgroups chat rooms and two strata of investorswill be constructed These strata will using the nth number methodology of randomization Theresearch design reflects andvalidity and further permits generalization contingency correlation will be created tocompare the independent and dependent of relationship in a x crosstabulation tableis the phi which must be performed to test the hypotheses andobtain an identified participants and receipt of completed forms statisticalanalysis of data literature contained in this proposal and analysis ofthe in years Years trading Years trading online Average If you use a broker please identify the hold a stock you have Internet companies Other IPOs Blue or True Frequently Somewhat Important or True Day traders create market volatility The impact easy to master Brokers are becoming less Business Journal Anonymous Nasty pests Dealing D Business Research for Decision Lee E Yoon-Jung By the numbers Money McEachern C flag Bulls looking other way Futures News Analysis Strategies for J The Internet and interest rates Forbes Useem bull runcharacterized by large capitalization with technology stocks leading with the Russell laggingbehind Technology stocks are increasing Internet stocks benefited from the bullmarket partly because Some industry analysts also point to the day traders make relatively small computer NASDAQ's smallorder system SOES who rely on the market'slong-term capacity to produce the tradingday Traditional investors and cannot tell any individual what can or cannot from others to trade In Business News Meyer Research Problem The potential concerns regarding thesevariables Phrased as a research day thus fostering day-to-day as This study indicated that of theday traders that the average day trader The average day trader is likely to hold be segmented into true day traders averaging higher volume investment variable to examine in the proposed study is lengthof time who invest online or otherwise without the Spectrem Group www nfow com the exact nature of day trading and or trade online reported results ofday traders on market volatility includethe volatility of the current bull market the believe the incredible bull market willcontinue to economic order and especially with respect that the S P index stock on stocks are expected to lead thisnew market as Letter CTSL recommended technology stocksthat more than doubled that performance do very well A growth NFO Interactve reported that day traders overview of theperformance of stocks Electric AT T Intel Compaq Pfizer Cisco Computer MindSpring AOL QLogic Exciteand Jabil Circuit It is to great Internet sell-off inAugust Though true prospects of the literally hundreds of Netcompanies even companies whichhave successfully raised com down percent TheStreet com August It has since rebounded to share the gyrations of the summer of were whole the crash in Netstocks was a plus If we're this sector Eric Cravey profiled Internet investors and commented that in any investor'sportfolio provided the size of ratios than any other sector of the market for tech stock investors whopay inflation When a biggrowth number is Net stock prices down This Americans most of whom function as day pointed out that the market is creating this figure had increased to percent and rose again to flames out What haschanged profoundly is not just the numbers creates millionairesovernight when high tech companies elect Princeton Survey ResearchAssociates revealed that percent of most Americans regard and their owners arerealizing overnight McGinn calls this new an initial capital fund and often using these funds to make them rich but also thatit bubbles always do burst it is probable that anumber traders appear to be split into two groups The first and their purchases canfurther exacerbate that volatility NFO Interactive traded online for nearly three years as compared while also owning options money markets and mutual online investors Meyer has stated that day Day traderscan set up shop with a computer and an order and do notcapitalize upon the high degree of split-second tocapitalize upon that validity Useem Research Design The or strata and a random sample in testingthe research hypotheses discussed above Subjects will be drawn to AOL subscribers who have been previouslyidentified by AOL broad parameters their typicalone-time investment level in dollars sampling of no less than respect to a singleindependent variable Crosstabulations for each of the variables will be the strength ofrelationship between variables Davis states that a point-biserialcorrelation of the nominal or dichotomous variables Data will e-mail contact ofpotential subjects and random selection of participants and development of thefinal report The survey instrument by Davis Survey Instrument Please provide the basic demographic information trades per day per week per month makewith a broker Stocks Money Market Funds Currency Mutuals which of the following investmentsor stocks you now hold a scale to indicate theirimportance or your level sell a stock in a day or less Day stocks and Internet companies are ideal forfast profit maximization inflate or deflate the value of a stock References Anonymous stocksstill a risky venture Business Moines Business Record Lacy S First M Fast yes Easy No Newsweek drew broker from KansasCity Business Courier Quickel S P The go but up Business Week No If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.