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Expectations, Illiquidity, and Short-Term Trading

Cespa, Giovanni; Vives, Xavier - 2021

We consider a two-period market with persistent liquidity trading and risk averse privately informed investors who have … a one period horizon. With persistence, prices reflect average expectations about fundamentals and liquidity trading … equilibria which can be ranked in terms of liquidity, volatility, and informational efficiency. We establish the limits of the …

Persistent link: https://www.econbiz.de/10013316042

Illiquidity and Under-Valuation of Firms

Gale, Douglas - 2012

We study a competitive model in which market incompleteness implies that debt-financed firms may default in some states of nature and default may lead to the sale of the firms' assets at fire sale prices when markets are illiquid. This incompleteness is the only friction in the model and the...

Persistent link: https://www.econbiz.de/10013116475

Quoted Spreads and Trade Imbalance Dynamics in the European Treasury Bond Market

Caporale, Guglielmo Maria - 2013

documents the existence of an asymmetric relationship between market liquidity and trading imbalances: when quoted spreads rise … (fall) and liquidity falls (increases) buy (sell) orders tend to prevail. Risk-averse market-makers, with inventory … characteristics, stock market volatility, macroeconomic releases and liquidity management operations of the monetary authorities …

Persistent link: https://www.econbiz.de/10013094028

Rumors and Runs in Opaque Markets : Evidence from Panic of 1907

Fohlin, Caroline - 2016

impact of information asymmetry during the liquidity freeze and market run of October 1907 - one of the most severe financial …

Persistent link: https://www.econbiz.de/10012981593

Asset Auctions, Information, and Liquidity

Vives, Xavier - 2021

A model is presented of a uniform price auction where bidders compete in demand schedules; the model allows for common and private values in the absence of exogenous noise. It is shown how private information yields more market power than the levels seen with full information. Results obtained...

Persistent link: https://www.econbiz.de/10013316270

Limit-Order Submission Strategies under Asymmetric Information

Menkhoff, Lukas - 2013

This paper provides evidence that informed traders dominate the response of limit-order submissions to shocks in a pure limit-order market. In the market we study, informed traders are highly sensitive to spreads, volatility, momentum and depth. By contrast, uninformed traders are relatively...

Persistent link: https://www.econbiz.de/10013094725

Exchange Rates Dynamics in a Target Zone - A Heterogeneous Expectations Approach

Bauer, Christian; De Grauwe, Paul; Reitz, Stefan - 2021

The target zone model of Krugman (1991) has failed empirically. In this paper, we develop a model of the exchange rate with heterogeneous agents in a free floating and a target zone regime. We show that this simple model mimics the empirical puzzles of exchange rates: excessive volatility, fat...

Persistent link: https://www.econbiz.de/10013316875

Bubbles in Hybrid Markets - How Expectations About Algorithmic Trading Affect Human Trading

Farjam, Mike - 2015

Bubbles are omnipresent in lab experiments with asset markets. Most of these experiments were conducted in environments with only human traders. Today markets are substantially determined by algorithmic traders. Here we use a laboratory experiment to measure changes of human trading behavior if...

Persistent link: https://www.econbiz.de/10013009851

Multi-Pollutant Point-Nonpoint Trading with Participation Decisions : The Role of Transaction Costs

Reeling, Carson - 2018

High transaction costs and thin participation plague water quality trading and prevent markets from delivering expected efficiency gains. Point sources generate a single pollutant, while nonpoint sources generate multiple, complementary pollutants. We develop a dynamic search model of...

Persistent link: https://www.econbiz.de/10012911045

FDI, Trade Costs and Regional Asymmetries

Darby, Julia - 2013

We set up a trade model where three countries compete for an exogenous number of firms. Our innovation lies in the geography of the model. Of the three countries, one is the hub through which all trade takes place. First, we establish the natural geography of the region, which is given by the...

Persistent link: https://www.econbiz.de/10013072512