The Market Microstructure of Central Bank Bond Purchases

2018 ◽  
Vol 55 (1) ◽  
pp. 193-221 ◽  
Author(s):  
Kathi Schlepper ◽  
Heiko Hofer ◽  
Ryan Riordan ◽  
Andreas Schrimpf
Keyword(s):  
Price Impact ◽  
Market Liquidity ◽  
Order Book ◽  
Low Frequencies ◽  
Price Impacts ◽  
Level Data ◽  
Perspective Drawing ◽  
Portfolio Managers ◽  
Flow Effects ◽  
The Impact

We study quantitative easing (QE) policies from a microstructure perspective, drawing on intraday transaction-level data for German bonds (purchased under the Eurosystem’s QE program). An initial analysis of purchase decisions reveals that portfolio managers consider liquidity and the scarcity of securities in repo markets. Suggestive of significant flow effects, we detect price impacts of purchases at high and low frequencies. We find the impact on market liquidity and functioning to be ambiguous. A higher purchase volume lowers transaction costs but has an adverse impact on order-book depth. The price impact varies with market conditions and is higher for more illiquid bonds.

scholarly journals EXPRESS: Measuring the real-time stock market impact of firm-generated content

2021 ◽  
pp. 002224292110428
Author(s):  
Ewelina Lacka ◽  
D. Eric Boyd ◽  
Gbenga Ibikunle ◽  
P.K. Kannan
Keyword(s):  
Subject Matter ◽  
High Frequency ◽  
Stock Price ◽  
Price Impact ◽  
Negative Valence ◽  
Price Impacts ◽  
Competitor Orientation ◽  
Frequency Changes ◽  
The Impact

Firms increasingly follow an ‘always on’ philosophy, producing multiple pieces of firm-generated content (FGC) throughout the day. Current methodologies used in marketing are unsuited to unbiasedly capturing the impact of FGC disseminated intermittently throughout the day in stock markets characterized by ultra-high frequency trading. They also neither distinguish between the permanent (i.e. long-term) and temporary (i.e. short-term) price impacts nor identify FGC attributes capable of generating these price impacts. In this study, the authors define price impact as the impact on the variance of stock price. Employing a market microstructure approach to exploit the variance of high frequency changes in stock price the authors estimate the permanent and temporary price impacts of the firm-generated Twitter content of S&P 500 IT firms. The authors find that firm-generated tweets induce both permanent and temporary price impacts, which are linked to tweet attributes; valence and subject matter. Tweets reflecting only valence or subject matter concerning consumer or competitor orientation result in temporary price impacts, while those embodying both attributes generate permanent price impact; negative valence tweets about competitors generate the largest permanent price impacts. Building on these findings, the authors offer suggestions to marketing managers on the design of intraday FGC.

scholarly journals Price Discovery in the U.S. Treasury Cash Market: On Principal Trading Firms and Dealers

2020 ◽  
Vol 2020 (095) ◽  
pp. 1-36
Author(s):  
James Collin Harkrader ◽  
◽  
Michael Puglia ◽  
Keyword(s):  
Theoretical Models ◽  
Limit Order Book ◽  
Price Impact ◽  
Market Liquidity ◽  
Order Book ◽  
Limit Order ◽  
Limit Orders ◽  
Cash Transaction ◽  
Informational Advantage

We explore the following question: does the trading activity of registered dealers on Treasury interdealer broker (IDB) platforms differ from that of principal trading firms (PTF), and if so, how and to what effect on market liquidity? To do so, we use a novel dataset that combines Treasury cash transaction reports from FINRA’s Trade Reporting and Compliance Engine (TRACE) and publicly available limit order book data from BrokerTec. We find that trades conducted in a limit order book setting have high permanent price impact when a PTF is the passive party, playing the role of liquidity provider. Conversely, we find that dealer trades have higher price impact when the dealer is the aggressive party, playing the role of liquidity taker. Trades in which multiple firms (whether dealers or PTFs) participate on one or both sides, however, have relatively low price impact. We interpret these results in light of theoretical models suggesting that traders with only a “small” informational advantage prefer to use (passive) limit orders, while traders with a comparatively large informational advantage prefer to use (aggressive) market orders. We also analyze the events that occurred in Treasury markets in March 2020, during the onset of the COVID-19 pandemic.

RESILIENT PRICE IMPACT OF TRADING AND THE COST OF ILLIQUIDITY

2013 ◽  
Vol 16 (06) ◽  
pp. 1350037 ◽  
Author(s):  
ALEXANDRE ROCH ◽  
H. METE SONER
Keyword(s):  
Price Impact ◽  
Maximization Problem ◽  
Order Book ◽  
Bid Ask Spread ◽  
Price Impacts ◽  
Liquidity Costs ◽  
Utility Maximization Problem ◽  
The Cost

We construct a model for liquidity risk and price impacts in a limit order book setting with depth, resilience and tightness. We derive a wealth equation and a characterization of illiquidity costs. We show that we can separate liquidity costs due to depth and resilience from those related to tightness, and obtain a reduced model in which proportional costs due to the bid-ask spread is removed. From this, we obtain conditions under which the model is arbitrage free. By considering the standard utility maximization problem, this also allows us to obtain a stochastic discount factor and an asset pricing formula which is consistent with empirical findings (e.g., Brennan and Subrahmanyam (1996); Amihud and Mendelson (1986)). Furthermore, we show that in limiting cases for some parameters of the model, we derive many existing liquidity models present in the arbitrage pricing literature, including Çetin et al. (2004) and Rogers and Singh (2010). This offers a classification of different types of liquidity costs in terms of the depth and resilience of prices.

The impact of different names for a wine variety on prices

2018 ◽  
Vol 30 (2) ◽  
pp. 185-200 ◽  
Author(s):  
Eddie Oczkowski
Keyword(s):  
Revealed Preference ◽  
Price Impact ◽  
Research Approach ◽  
Hedonic Price ◽  
Content Type ◽  
Name Change ◽  
Price Premiums ◽  
Price Impacts ◽  
The Impact ◽  
Varietal Name

Purpose The purpose of this study is to illustrate a general method for identifying the price impact of using a different varietal name for a wine. Design/methodology/approach A revealed preference research approach is employed using marketed wines and prices. Price impacts are estimated using hedonic price models which control for the influence of other factors on prices. The technique is applied to the use of accepted synonyms to describe different varieties of Australian wine. Findings The use of varietal synonyms in the Australian market is suggested to be more of a marketing strategy designed to command a higher price rather than because of wine stylistic reasons. Important premiums are estimated for the use of the terms Syrah, Pinot Gris and to a lesser extent for Fumé Blanc. Practical implications Australian wine producers may be able to command price premiums by strategically choosing a name for a particular varietal. It appears no significant stylistic changes are needed to “justify” any varietal name change, and as such, only a label name change may be required. A switch to French-associated or -sounding names for a wine varietal may result in price premiums for Australian producers. Originality/value The paper illustrates a general revealed preference method for identifying wine varietal name price premiums and further illustrates the importance of “Frenchness” in wine name use.

scholarly journals The Impact of Iceberg Orders in Limit Order Books

2017 ◽  
Vol 07 (03) ◽  
pp. 1750007 ◽  
Author(s):  
Stefan Frey ◽  
Patrik Sandås
Keyword(s):  
Informed Trading ◽  
Price Impact ◽  
Order Book ◽  
Limit Order ◽  
Reduced Order ◽  
Market Participants ◽  
Limit Orders ◽  
Order Books ◽  
Limit Order Books ◽  
The Impact

We examine the impact of iceberg orders on the price and order flow dynamics in limit order books. Iceberg orders allow traders to simultaneously hide a large portion of their order size and signal their interest in trading to the market. We show that when market participants detect iceberg orders they tend to strongly respond by submitting matching market orders consistent with iceberg orders facilitating the search for latent liquidity. The greater the fraction of an iceberg order that is executed, the smaller is its price impact consistent with liquidity rather than informed trading. The presence of iceberg orders is associated with increased trading consistent with a positive liquidity externality, but the reduced order book transparency associated with iceberg orders also creates an adverse selection cost for limit orders that may partly offset any gains.

scholarly journals Liquidity of the Chinese Agricultural Futures Market and Its Impact on Futures Price—Based on High-Frequency Data

2018 ◽  
Vol 10 (12) ◽  
pp. 4579
Author(s):  
Yuanyuan Xu ◽  
Chongguang Li
Keyword(s):  
Opposite Effect ◽  
Negative Relationship ◽  
Asset Returns ◽  
Informed Trading ◽  
Price Impact ◽  
Market Liquidity ◽  
Agricultural Commodity ◽  
Agricultural Futures ◽  
Liquidity Costs ◽  
The Impact

This study examines the price impact of intraday trading activity and daily market liquidity of Chinese agricultural futures by analyzing continuous intraday 15-min and daily trading datasets, respectively. Corn and soybean, the necessity of the nation and people’s survival in China, are taken as case studies. Our main findings are threefold. Firstly, there is evidence of the presence of informed trading through persistent effects of trade size for both purchases and sales. The magnitude of effects and the seasonality of informed trading vary among varieties, which support the importance of night trading for price smoothing. Secondly, the impact of liquidity costs on returns does not permanently persist. For example, there appears a significant Friday effect with a linear negative relationship in the soybean market, while an exact opposite effect can be found in the corn market for Monday. Thirdly, while the results show no effect of holding position on asset returns in the corn market, the market size of soybean futures exerts a positive Thursday effect, which is prior to the Friday effect of transaction cost. A better understanding of liquidity costs and liquidity pricing is of great significance to a sustainable development of the agricultural commodity market in China.

scholarly journals Microscopic Understanding of Cross-Responses Between Stocks: A Two-Component Price Impact Model

2017 ◽  
Vol 03 (03n04) ◽  
pp. 1850009
Author(s):  
Shanshan Wang ◽  
Thomas Guhr
Keyword(s):  
Price Change ◽  
Time Lag ◽  
Price Impact ◽  
Impact Model ◽  
Response Functions ◽  
Short Term ◽  
Impact Function ◽  
Price Impacts ◽  
Component Price ◽  
The Impact

We construct a price impact model between stocks in a correlated market. For the price change of a given stock induced by the short-term liquidity of this stock itself and of the information about other stocks, we introduce a self- and a cross-impact function of the time lag. We model the average cross-response functions for individual stocks employing the impact functions of the time lag, the impact functions of traded volumes and the trade-sign correlators. We further quantify and interpret the price impacts of time lag in terms of temporary and permanent components. To support our model, we also analyze empirical data, in particular the memory properties of the sign self- and average cross-correlators. The relation between the average cross-responses and the traded volumes which are smaller than their average is of power-law form.

scholarly journals Anthropogenic drought dominates groundwater depletion in Iran

2021 ◽  
Vol 11 (1) ◽  
Author(s):  
Samaneh Ashraf ◽  
Ali Nazemi ◽  
Amir AghaKouchak
Keyword(s):  
Economic Security ◽  
Groundwater Depletion ◽  
Groundwater Storage ◽  
Rates Of Change ◽  
Level Data ◽  
Basin Scale ◽  
Storage Basin ◽  
Groundwater Reserves ◽  
The Impact ◽  
Hydrological Droughts

AbstractUsing publicly-available average monthly groundwater level data in 478 sub-basins and 30 basins in Iran, we quantify country-wide groundwater depletion in Iran. Natural and anthropogenic elements affecting the dynamics of groundwater storage are taken into account and quantified during the period of 2002–2015. We estimate that the total groundwater depletion in Iran to be ~ 74 km3 during this period with highly localized and variable rates of change at basin and sub-basin scales. The impact of depletion in Iran’s groundwater reserves is already manifested by extreme overdrafts in ~ 77% of Iran’s land area, a growing soil salinity across the entire country, and increasing frequency and extent of land subsidence in Iran’s planes. While meteorological/hydrological droughts act as triggers and intensify the rate of depletion in country-wide groundwater storage, basin-scale groundwater depletions in Iran are mainly caused by extensive human water withdrawals. We warn that continuation of unsustainable groundwater management in Iran can lead to potentially irreversible impacts on land and environment, threatening country’s water, food, socio-economic security.

Housing Prices and Government Approval: The Impact of Housing Booms on Left- and Right-Wing Governments in 16 Advanced Industrialized Countries

2021 ◽  
Vol 54 (1) ◽  
pp. 163-185
Author(s):  
Sung Min Han ◽  
Mi Jeong Shin
Keyword(s):  
Housing Prices ◽  
Right Wing ◽  
Industrialized Countries ◽  
Left Wing ◽  
Approval Ratings ◽  
The United Kingdom ◽  
Level Data ◽  
Left And Right ◽  
The Government ◽  
The Impact

AbstractIn this article, we argue that rising housing prices increase voter approval of incumbent governments because such a rise increases personal wealth, which leads to greater voter satisfaction. This effect is strongest under right-wing governments because those who benefit from rising prices—homeowners—are more likely to be right-leaning. Non-homeowners, who are more likely to vote for left-leaning parties, will view rising housing prices as a disadvantage and therefore feel the government does not serve them well, which will mitigate the advantage to left-wing governments. We find support for our arguments using both macro-level data (housing prices and government approval ratings in 16 industrialized countries between 1960 and 2017) and micro-level data (housing prices and individuals’ vote choices in the United Kingdom using the British Household Panel Survey). The findings imply that housing booms benefit incumbent governments generally and right-wing ones in particular.

Sign in / Sign up

Export Citation Format

Share Document