The cross-market information content of stock and bond order flow
In this paper I test the hypothesis that trading activity in the stock and bond markets contains important marketwide pricing information. Using a large sample of actively traded stocks and U.S. Treasury securities, I find that aggregate order imbalances play a strong role in explaining cross-market returns. I interpret this as evidence that aggregate order flow reveals information about the risk preferences, beliefs, and endowments of the investor population that is relevant for pricing securities in both markets. I also find evidence that cross-market hedging is an important source of linkages across the two markets, especially during periods of elevated equity volatility.
Year of publication: |
2009
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Authors: | Underwood, Shane |
Published in: |
Journal of Financial Markets. - Elsevier, ISSN 1386-4181. - Vol. 12.2009, 2, p. 268-289
|
Publisher: |
Elsevier |
Subject: | Cross-markets Stock-bond relationship Order flow |
Saved in:
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