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What Were Institutions Up To With AMD?

Apr. 07, 2018 8:16 AM ETAdvanced Micro Devices, Inc. (AMD)476 Comments
Kwan-Chen Ma profile picture
Kwan-Chen Ma


  • "Prior to" investment banks’ downgrade announcements, AMD's short volume and option volume increased sharply.
  • AMD's stock prices dropped 13% amid the downgrades.
  • Ironically, Goldman Sachs and Morgan Stanley increased their AMD holding significantly "after" they downgraded AMD's stock.
  • Would you figure that?

By K C Ma, Matthew Sweeney, and Zachary Gunn

Advanced Micro Devices' (NASDAQ: AMD) share prices have been long known to be affected by investment banks' analyst recommendations. In this article, we examined short sale and option trading activities surrounding the releases of institutions' downgrades on AMD. The investment banks in this study include Goldman Sachs, Morgan Stanley, Barclays, and Susquehanna whose analyst reports have been capable of exerting market-moving impacts. Also considered is the recent infamous “CTS report” for obvious reason.

In order to isolate the market impact, we selected the downgrade reports only if there were no major ER events and no major analysts’ reports one month prior. In Table 1, the five downgrade reports were identified for the five institutions in question. Since AMD is the stock “in interest,” the market data including daily short sale and call and put option volume were collected for the 30-day time period surrounding the report dates. The following is the finding on the changes in market activities around the dates.

Short Sales And Option Trades Increased After The Releases

Since the downgrade reports were issued by these large, influential institutions, it is expected that resulting bearishness will encourage short sale, put buying and call writing activities. On average, the short sale increased to 9.8 million shares at the release date, compared with 5 million in the regular period (Figure 1). Similarly, option volume (call and put) has increased to 250,000 contracts at the release date from a regular level around 140,000 contracts (Figure 2). There will be an obvious selling pressure on AMD shares following the release of downgrade reports, especially from the well-known investment banks.

The selling is prevalent across all banks. The short volume increased from 6 million shares 5 days before to 10 million shares the day of

This article was written by

Kwan-Chen Ma profile picture
K C Ma, Ph.D, CFA, is the Eminent Scholar and the Mary Ball Washington/Switzer Brothers Endowed Chair of Finance at University of West Florida. I am the Director of Argo Investments Institute which enables college students to manage real money stock, bond, and option funds. I manage market-neutral institutional hedge funds in KCM Asset Management. I write about stocks, bonds, and derivative strategies, long or short, based on our quantitative processes.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

-- We will be glad to provide all the data we used in this study upon request. -- If you are interested in this study, I would recommend that you follow, not me, but my co-authors, Matthew Sweeney and Zachary Gunn, two of the smartest young authors.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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