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Econometric Models of Limit-Order Executions

Lo, Andrew W.; MacKinlay, Archie Craig; Zhang, June - 2021

This paper attempts to assess whether money can generate persistent economic" fluctuations in dynamic general equilibrium models of the business cycle. We show that a small" nominal friction in the goods market can make the response of output to monetary shocks large" and persistent if it is...

Persistent link: https://www.econbiz.de/10013248406

What Do We Really Know About the Cross-Sectional Relation between Past and Expected Returns?

Grinblatt, Mark - 2014

profits across stock characteristics, season, and tax environment appear inconsistent with existing theory, but may point to …

Persistent link: https://www.econbiz.de/10012752800

High Frequency Market Microstructure Noise Estimates and Liquidity Measures

Aït-Sahalia, Yacine - 2010

Using recent advances in the econometrics literature, we disentangle from high frequency observations on the transaction prices of a large sample of NYSE stocks a fundamental component and a microstructure noise component. We then relate these statistical measurements of market microstructure...

Persistent link: https://www.econbiz.de/10012759514

Execution Risk and Arbitrage Opportunities in the Foreign Exchange Markets

Itō, Takatoshi; Yamada, Kenta; Takayasu, Misako; … - 2021

With the high-frequency data of firm quotes in the transaction platform of foreign exchanges, arbitrage profit … pairs—can be detected to emerge and disappear in the matter of seconds. The frequency and duration of such arbitrage … arbitrage opportunity and places orders for multiple transactions—two in negative spreads and three in triangular arbitrage …

Persistent link: https://www.econbiz.de/10013310382

Dynamic Trading with Predictable Returns and Transaction Costs

Garleanu, Nicolae - 2010

We derive a closed-form optimal dynamic portfolio policy when trading is costly and security returns are predictable by signals with different mean-reversion speeds. The optimal strategy is characterized by two principles: 1) aim in front of the target and 2) trade partially towards the current...

Persistent link: https://www.econbiz.de/10013151649

Portfolio Choice with Illiquid Assets

Ang, Andrew - 2013

can only be traded infrequently. The possibility of a liquidity crisis leads to limited arbitrage in normal times …

Persistent link: https://www.econbiz.de/10013076171

A Model of Momentum

Liu, Laura Xiaolei - 2011

Optimal investment of firms implies that expected stock returns are tied with the expected marginal benefit of investment divided by the marginal cost of investment. Winners have higher expected growth and expected marginal productivity (two major components of the marginal benefit of...

Persistent link: https://www.econbiz.de/10013130782

A Unified Theory of Underreaction, Momentum Trading and Overreaction in Asset Markets

Hong, Harrison G. - 2008

We assume that the instantaneous riskless rate reverts towards a central tendency which in turn, is changing stochastically over time. As a result, current short-term rates are notquot; sufficient to predict future short-term rates movements, as would be the case if the centralquot; tendency was...

Persistent link: https://www.econbiz.de/10012774922

What Drives the Disposition Effect? An Analysis of a Long-Standing Preference-Based Explanation

Barberis, Nicholas - 2006

explanation for this puzzle is based on prospect theory. Despite its prominence, this explanation has received little formal … scrutiny. We take up this task, and analyze the trading behavior of investors with prospect theory preferences. We find that …, at least for the simplest implementation of prospect theory, the link between these preferences and the disposition …

Persistent link: https://www.econbiz.de/10012779644

Microstructure of the Yen/Dollar Foreign Exchange Market : Patterns of Intra-Day Activity Revealed in the Electronic Broking System

Ito, Takatoshi - 2010

This paper establishes several intra-day patterns of the high-frequency exchange rate behavior, using the firm bid-ask quote, transaction of the EBS data set. First, the activity of quote and transactions is high in the beginning hours of the three major currency markets -- Tokyo, London, and...

Persistent link: https://www.econbiz.de/10012762564