Showing 1 - 10 of 8,449
This paper studies predatory trading: trading that induces and/or exploits other investors' need to reduce their positions. We show that if one trader needs to sell, others also sell and subsequently buy back the asset. This leads to price overshooting and a reduced liquidation value for the...
Persistent link: https://www.econbiz.de/10012467935
In recent years, there has been a large literature on how stock exchange specialists set prices when there are investors who know more about the stock than they do. An important assumption in this literature is that there are *liquidity traders* who are equally likely to buy or sell for...
Persistent link: https://www.econbiz.de/10012475127
We extend Kyle's (1985) model of insider trading to the case where liquidity provided by noise traders follows a general stochastic process. Even though the level of noise trading volatility is observable, in equilibrium, measured price impact is stochastic. If noise trading volatility is...
Persistent link: https://www.econbiz.de/10012460209
Using over eight trillion observations of market data, we use a regression discontinuity design to analyze the effect of increasing the minimum price variation (MPV) for quoting equity securities in light of recent proposals to increase the MPV from $0.01 to $0.05. We show that a larger MPV...
Persistent link: https://www.econbiz.de/10012457381
We propose a model of dynamic trading where a strategic high frequency trader receives an imperfect signal about future order flows, and exploits his speed advantage to optimize his quoting policy. We determine the provision of liquidity, order cancellations, and impact on low frequency traders...
Persistent link: https://www.econbiz.de/10012459130
concerns by examining a novel historical experiment, the establishment of a clearinghouse on the New York Stock Exchange (NYSE …
Persistent link: https://www.econbiz.de/10012458209
During the booms that precede crises in emerging economies, policy makers often struggle to limit capital flows and their expansionary consequences. The main policy tool for this task is sterilization - essentially a swap of international reserves for public bonds. However, there is an extensive...
Persistent link: https://www.econbiz.de/10012471010
This paper describes regularities in the intraday spreads and prices quoted by dealers on the London Stock Exchange. It develops a measure of spread-related transaction costs, one that recognizes dealers' willingness to price trades within their quoted spreads. This measure of transaction costs...
Persistent link: https://www.econbiz.de/10012474198
We identify different roles traders play using data with trader identities for all transactions in SENSEX-index stocks on the Bombay Stock Exchange from January 2005 to December 2011. Individual day traders (IDT) are identified as "noise traders", who play an important role in the market...
Persistent link: https://www.econbiz.de/10014250145
In a model with heterogeneous-risk-aversion agents facing margin constraints, we show how securities' required returns are characterized both by their betas and their margin requirements. Negative shocks to fundamentals make margin constraints bind, lowering risk-free rates and raising Sharpe...
Persistent link: https://www.econbiz.de/10012461880