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Seppi, Duane; Gallmeyer, Michael; Hollifield, Burton - Econometric Society - 2004

preferences of future trading counter-parties causes randomness in future resale prices that we call liquidity risk. It is natural … to suppose that investors are asymmetrically informed about liquidity risk. Through a process of liquidity discovery …, trading volumes and prices reveal private information about future counter-party preferences. The liquidity discovery process …

Persistent link: https://www.econbiz.de/10005130211

Limits of Arbitrage: Theory and Evidence from the Mortgage-Backed Securities Market

Vigneron, Olivier; Gabaix, Xavier; Krishnamurthy, Arvind - Econometric Society - 2004

``Limits of Arbitrage" theories require that the marginal investor in a particular asset market be a specialized arbitrageur. Then the constraints faced by this arbitrageur (i.e. capital constraints) feed through into asset prices. We examine the mortgage-backed securities (MBS) market in this...

Persistent link: https://www.econbiz.de/10005130216

Do Heterogeneous Beliefs Matter for Asset Pricing?

Juergens, Jennifer; Anderson, Evan; Ghysels, Eric - Econometric Society - 2004

We study how heterogeneous beliefs affect returns and examine whether heterogeneous beliefs are a priced factor in traditional asset pricing models. To accomplish this task, we suggest new empirical measures based on the disagreement among analysts about expected (short-term and long-term)...

Persistent link: https://www.econbiz.de/10005342284

Long-run and Cyclical Dynamics in the US Stock Market

Gil-Alana, L.A.; caporale, G.M. - Econometric Society - 2004

This paper examines the long-run dynamics and the cyclical structure of the US stock market using fractional integration techniques. We implement a version of the tests of Robinson (1994a), which enables one to consider unit (or fractional) roots both at the zero (long-run) and at the cyclical...

Persistent link: https://www.econbiz.de/10005063571

Media Frenzies in Markets for Financial Information

Veldkamp, Laura - Econometric Society - 2004

Promising emerging equity markets often witness investment herds and frenzies, accompanied by an abundance of media coverage. Complementarity in information acquisition can explain these anomalies. Because information has a high fixed cost of production, its equilibrium price is low when...

Persistent link: https://www.econbiz.de/10005063589

Covariance-based orthogonality tests for regressors with unknown persistence

Shimotsu, Katsumi; Maynard, Alex - Econometric Society - 2004

This paper develops a new covariance-based test of orthogonality that may be attractive when regressors have roots close or equal to unity. In this case standard regression-based orthogonality tests can suffer from (i) size distortions and (ii) uncertainty regarding the appropriate model in...

Persistent link: https://www.econbiz.de/10005342319

Profiting from Mean-Reverting Yield Curve Trading Strategies

Ramaswamy, Krishna; Chua, Choong-Tze; Koh, Winston T.H. - Econometric Society - 2004

A large class of fixed income trading strategies focuses on opportunities offered by the interest rate term structure. This paper studies a set of yield curve trading strategies that are based on the view that the yield curve mean-reverts to an unconditional curve. These mean-reverting trading...

Persistent link: https://www.econbiz.de/10005702587

High-Frequency Principal Components and Evolution of Liquidity in a Limit Order Market

Tyurin, Konstantin - Econometric Society - 2004

The paper applies a popular methodology of competing risks to the analysis of the timing and interaction between the Deutsche Mark/U.S. dollar transactions, quotes, and cancellations in the Reuters D2000-2 electronic brokerage system. Consistently with previous stock market studies, the bid-ask...

Persistent link: https://www.econbiz.de/10005342260

Understanding limit order book depth: conditioning on trade informativeness

Beltran, Helena; Menkveld, Albert J. - Econometric Society - 2004

-trade durations at times of relatively uninformative market orders, which is consistent with liquidity traders concentrating their …

Persistent link: https://www.econbiz.de/10005699633

Do individual investors learn from their trading experience

Nicolosi, Gina; Peng, Liang - Econometric Society - 2004

This paper investigates whether individual investors adjust their stock trading according to their stock selection abilities, which can be inferred from their trading history. Fixed-effect panel regressions provide strong evidence that the ability to forecast future stock returns significantly...

Persistent link: https://www.econbiz.de/10005130195

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