Nash Equilibrium for Risk-Averse Investors in a Market Impact Game with Transient Price Impact

We consider a market impact game for [Formula: see text] risk-averse agents that are competing in a market model with linear transient price impact and additional transaction costs. For both finite and infinite time horizons, the agents aim to minimize a mean-variance functional of their costs or to maximize the expected exponential utility of their revenues. We give explicit representations for corresponding Nash equilibria and prove uniqueness in the case of mean-variance optimization. A qualitative analysis of these Nash equilibria is conducted by means of numerical analysis.

Stock Illiquidity and Firm Characteristics

Main objective of the study is to analyze firm characteristics which affect stock illiquidity. The paper aims to give suggestions and policy implications to corporates and investors while dealing with investments in illiquid stocks. ANOVA, chi-square tests, correlation analysis, univariate and multiple regression models are employed on Amihud (2002) (Amihud, Y., (2002). Illiquidity and Stock Returns: Cross-Section and Time-Series Effects, Journal of Financial Markets 5, 31–56) illiquidity measure and various firm characteristics. Findings of this paper suggest that firms with illiquid stocks can be characterized with low promoter’s stakes, high leverage, poor financial health, small size and low/negative profitability. The findings of the paper will be of relevance to retail investors who are at the mercy of informed investors. The results portray basic characteristics that an investor should look into before investing in any stock. The study is of value to the investors who are grieved because of the adverse selections and information asymmetry. Moreover, the basic nature of illiquid firms has never been studied.

The Cross-Sectional Spillovers of Single Stock Circuit Breakers

This paper uses transaction data to estimate how single stock circuit breakers on the London Stock Exchange affect other stocks that remain in continuous trading. This “spillover” effect is estimated by calculating the effect of a trading halt on the market quality of stocks that remain in continuous trading and comparing this with the effect of a stock whose absolute returns are of a magnitude nearly sufficient to trigger a trading halt but do not do so. Market quality is measured using a combination of trading costs, volatility and volume. In the two-month period we study, characterized by a relatively volatile trading environment, we find that circuit breakers lead to a significant improvement in the liquidity, and reduction in the volatility, of stocks that remain in continuous trading. This suggests that — at least over the period covered by our data — single stock circuit breakers can play an important role in reducing the spillover of poor market quality across stocks.

Slow Decay of Impact in Equity Markets: Insights from the ANcerno Database

We present an empirical study of price reversion after the executed metaorders. We use a dataset with more than 8 million metaorders executed by institutional investors in the US equity market. We show that relaxation takes place as soon as the metaorder ends: while at the end of the same day, it is on average [Formula: see text] of the peak impact, the decay continues for the next few days, following a power-law function at short-time scales, and converges to a non-zero asymptotic value at long-time scales ([Formula: see text] days) equal to [Formula: see text] of the impact at the end of the first day, that is [Formula: see text] of peak impact. Due to a significant, multiday correlation of the sign of executed metaorders, a careful deconvolution of the observed impact must be performed to extract the estimate of the impact decay of isolated metaorders.