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Emory University, Goizueta Business School

Professor Tarun Chordia received his PhD in finance from the Anderson School, UCLA, in 1993. Prior to his doctoral studies, he worked for Citibank as a relationship and credit manager in the Financial Institutions Group. He has been an Assistant Professor of Finance at the Owen Graduate School of Management, Vanderbilt University from 1993 to 2000. He joined the Goizueta Business School at Emory University in 2000.  

Professor Chordia’s research is grounded in both theory and empirical methods and spans a diverse area of financial economics. Professor Chordia has published extensively in the top finance journals, including Journal of Finance, Journal of Financial Economics, the Review of Financial Studies, Journal of Business, Journal of Financial and Quantitative Analysis, Review of Finance, and Management Science. He has received numerous awards for his research on empirical asset pricing and market microstructure. He has been the managing editor of the Journal of Financial Markets from 2013 to 2022 and a past associate editor of Review of Financial Studies.  He is on the program committee for numerous conferences and is a referee for numerous journals.

Empirical Asset Pricing

Market Microstructure

Liquidity

High Frequency Trading

Tarun Chordia - SSRN Link

Tarun Chordia - Google Scholar Link

We examine whether the recent regime of increased liquidity and trading activity is associated with attenuation of prominent equity return anomalies due to increased arbitrage. 

Have Capital Market Anomalies Attenuated in the Recent Era of High Liquidity and Trading Activity?

Improved trading technologies are changing the markets, facilitating the boom in algorithmic trading and the growth of hedge funds. Liquidity and trading volume continue to hit record levels. In a research study, Tarun Chordia, R. Howard Dobbs Professor of Finance, and coauthors Avanidhar Subrahmanyam (UCLA) and Tong Qing (Singapore Management U) analyzed whether or not increased liquidity and the trading activity of hedge funds has had an impact on financial market anomalies. Anomalies are return patterns that are inconsistent with the basic risk-return paradigm of finance. Increased arbitrage is a possible factor in attenuating the impact of anomalies, including momentum, reversals, accruals, etc. To find the link, Chordia and his coauthors studied proxies for arbitrage trading, including “the impact of the decline in the tick size due to decimalization and the impact of hedge fund assets under management, short interest, and share turnover.” The researchers referenced a wide sampling of equity market anomalies for more than three decades to show that increased liquidity and hedge fund trading activity did ultimately result in the decrease of  the “economic and statistical significance of these anomalies.”

Increased trading activity and declining returns

Building on the growing literature on inter-firm links and limited attention, we find evidence of return predictability across alliance partners.

Alliances and Return Predictability 

Strategic alliances are agreements between two or more firms to pursue a set of agreed upon objectives while remaining independent organizations. Alliances are formed for a number of reasons, including licensing, marketing or distribution, development or research, technology transfer or systems integration, or some combination of the above. Tarun Chordia, R. Howard Dobbs professor of finance, and coauthors Jie Cao (Chinese U of Hong Kong) and Chen Lin (U Hong Kong) find evidence of return predictability across alliance partners. If the alliance partner or partners have high (or low) returns this month, then the firm has high (or low) returns over the next two months. Using a sample of alliances over the period 1985 to 2012, the authors find that a long-short portfolio sorted on lagged one-month returns of strategic alliance partners provides a return of over 85 basis points per month. This long-short portfolio return is robust to a number of specifications, including different adjustments for risk, controlling for different proxies for cross-autocorrelations, and excluding partnerships with customer-supplier relationships, as well as controls for industry returns. They theorize, “If investors are fully aware of the impact of strategic alliances on returns and pay attention to the firm-partner links, then the stock price of a firm should quickly adjust to price changes of its partners’ stocks.” The evidence suggests that investor inattention may be the source of a firm’s underreaction to its partners’ returns.

 The link between corporate alliances and returns

Tarun Chordia 

-the-link-between-corporate-alliances-and-returns

R. Howard Dobbs, Jr. Chaired Professor of Finance

Strategic alliances are agreements between two or more firms to pursue a set of agreed upon objectives while remaining independent organizations. Alliances are formed for a number of reasons, including licensing, marketing or distribution, development or research, technology transfer or systems integration, or some combination of the above. Tarun Chordia, R. Howard Dobbs professor of finance, and coauthors Jie Cao (Chinese U of Hong Kong) and Chen Lin (U Hong Kong) find evidence of return predictability across alliance partners. If the alliance partner or partners have high (or low) returns this month, then the firm has high (or low) returns over the next two months. Using a sample of alliances over the period 1985 to 2012, the authors find that a long-short portfolio sorted on lagged one-month returns of strategic alliance partners provides a return of over 85 basis points per month. This long-short portfolio return is robust to a number of specifications, including different adjustments for risk, controlling for different proxies for cross-autocorrelations, and excluding partnerships with customer-supplier relationships, as well as controls for industry returns. They theorize, “If investors are fully aware of the impact of strategic alliances on returns and pay attention to the firm-partner links, then the stock price of a firm should quickly adjust to price changes of its partners’ stocks.” The evidence suggests that investor inattention may be the source of a firm’s underreaction to its partners’ returns.

Source:  

increased-trading-activity-and-declining-returns

Improved trading technologies are changing the markets, facilitating the boom in algorithmic trading and the growth of hedge funds. Liquidity and trading volume continue to hit record levels. In a research study, Tarun Chordia, R. Howard Dobbs Professor of Finance, and coauthors Avanidhar Subrahmanyam (UCLA) and Tong Qing (Singapore Management U) analyzed whether or not increased liquidity and the trading activity of hedge funds has had an impact on financial market anomalies. Anomalies are return patterns that are inconsistent with the basic risk-return paradigm of finance. Increased arbitrage is a possible factor in attenuating the impact of anomalies, including momentum, reversals, accruals, etc. To find the link, Chordia and his coauthors studied proxies for arbitrage trading, including “the impact of the decline in the tick size due to decimalization and the impact of hedge fund assets under management, short interest, and share turnover.” The researchers referenced a wide sampling of equity market anomalies for more than three decades to show that increased liquidity and hedge fund trading activity did ultimately result in the decrease of  the “economic and statistical significance of these anomalies.”

Source:  

Dr. Tarun Chordia, R. Howard Dobbs Chair in Finance, talks about teaching and research at Goizueta Business School, Emory University. His research focuses on market anomalies and liquidity.

Biography: Tarun Chordia joined the Goizueta Business School in the fall of 2000. Tarun's research is grounded in both theory and empirical methods and spans a diverse area of financial economics. His teaching interests include securities and portfolios, financial institutions and fixed income markets. Prior to his doctoral studies, he worked for Citibank as a relationship and credit manager in the Financial Institutions Group. 

http://www.goizueta.emory.edu/Faculty/TarunChordia/

An excellent faculty attracts students of exceptional promise, nurtures the next generation of scholar teachers, and pursues the common good. Through their research, service, and teaching, the faculty members of Emory University shape our community in every way imaginable.  Discover the profiles of Emory faculty members and sample their work from across the disciplines at Great Scholars, Great Work, a project of the Office of the Provost in partnership with Emory College and the Emory Creative Group.

http://www.emory.edu/PROVOST/greatscholars/

Chuck E. Cheese or IBM? Tarun Chordia on finance

Because high-frequency trading is very profitable, there have been calls to regulate it. In this video, Tarun Chordia discusses how competition in the market takes care of negative externalities. This video was recorded at the Brevan Howard Centre for Financial Analysis in December 2016.

Produced by Econ Films

Do High-Frequency Traders Need to be Regulated? | Tarun Chordia

Plenary Talk: “True Liquidity and Fundamental Prices: US Tick Size Pilot”
Professor Tarun Chordia, Goizueta Business School, Emory University
Moderator: Professor Petko Kalev, La Trobe University

Tarun Chordia joined the Goizueta Business School in the fall of
2000. Prior to joining Emory University in 2000, Professor Tarun
Chordia received his PhD in finance from the Anderson School,
UCLA, in 1993. He was an Assistant Professor of Finance at the
Owen Graduate School of Management, Vanderbilt University
from 1993. Tarun's research is grounded in both theory and
empirical methods and spans a diverse area of financial
economics. His teaching interests include securities and
portfolios, financial institutions and fixed income markets. Prior to
his doctoral studies, he worked for Citibank as a relationship and
credit manager in the Financial Institutions Group.
He has received numerous awards for his research on empirical
asset pricing and market microstructure. Professor Chordia has
published extensively in the top finance journals, such as the
Journal of Business, the Journal of Finance, the Journal of
Financial Economics, the Journal of Financial Markets, the
Journal of Financial and Quantitative Analysis and the Review of
Financial Studies. He is currently the managing editor of the
Journal of Financial Markets and a past associate editor of the
Review of Financial Studies. He has been on the program
committee for the American Finance Association, the European
Finance Association, the NBER Market Microstructure group, the
Stern Microstructure Conference, the Utah Winter Finance
Conference and the Western Finance Association meetings, and
is a referee for numerous journals.

FMCG 2021 Plenary - Prof Tarun Chordia, “True Liquidity &amp; Fundamental Prices US Tick Size Pilot”

A second special academic plenary panel session with Editors will be moderated by Professor Terry Walter, with Professor Tarun Chordia, Professor Robert Faff, Professor Jonathan Karpoff and Professor Tom Smith as discussants.

See Conference program here: https://www.latrobe.edu.au/__data/assets/pdf_file/0003/1217514/FMCG-2021-Program_ebook_7Apr2021_FINAL_12.30PM.pdf

FMCG 2021 - Special Academic Panel Session II – Editors

Dr.Tarun Chordia joined the Goizueta Business School in the fall of 2000. His research is grounded in both theory and empirical methods and spans a diverse area of financial economics. His teaching interests include securities and portfolios, financial institutions and fixed income markets.

Prior to his doctoral studies, he worked for Citibank as a relationship and credit manager in the Financial Institutions Group.

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