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on Market Microstructure |
| By: | Yoshiro Tsutsui (Graduate School of Economics, Osaka University); Kenjiro Hirayama (School of Economics, Kwansei Gakuin University) |
| Abstract: | This paper uses one-minute returns on the TOPIX and S&P500 to examine the efficiency of the Tokyo and New York Stock Exchanges. Our major finding is that Tokyo completes reactions to New York within six minutes, but New York reacts within fourteen minutes. Dividing the sample period into three subperiods, we found that the response time has shortened and the magnitude of reaction has become larger over the period in both markets. The magnitude of response in New York to a fall in Tokyo is roughly double that of a rise. |
| Keywords: | international linkage, stock prices, market efficiency, high frequency data |
| JEL: | G14 G15 F36 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:0832&r=mst |
| By: | Park, Andreas (University of Toronto); Sgroi, Daniel (University of Warwick) |
| Abstract: | We undertook the first market trading experiments that allowed heterogeneously informed subjects to trade in endogenous time, collecting over 2000 observed trades. Subjects’ decisions were generally in line with the predictions of exogenous-time financial herding theory when that theory is adjusted to allow rational informational herding and contrarianism. While herding and contrarianism did not arise as frequently as predicted by theory, such behavior occurs in a significantly more pronounced manner than in comparable studies with exogenous timing. Types with extreme information traded earliest. Of those with more moderate information, those with signals conducive to contrarianism traded earlier than those with information conducive to herding. |
| Keywords: | Herding ; Contrarianism ; Endogenous-time ; Informational Efficiency, Experiments |
| JEL: | C91 D82 G14 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:868&r=mst |
| By: | Anton Suvorov (CEFIR, NES); Natalia Tsybuleva |
| Abstract: | The paper investigates credibility of the intermediary's advice in a bilateral trade model. A seller and a buyer with private and independent uniformly distributed valuations exchange a unit of good. Their trade is mediated by an intermediary, who at the pre-bargaining stage observes a coarse signal about the buyer's valuation and reveals some information to the seller. We first show that if the broker gets a fixed fee for each executed transaction, he can transmit his information credibly via cheap talk. Full information revelation can be sustained even when the intermediary's information about the buyer becomes arbitrarily precise. The transmission of information by the broker increases ex ante welfare of the seller and the broker, but has ambiguous impact on the buyer. If the intermediary observes signals about valuations of both participants, the fully revealing equilibrium exists only under certain restrictions on parameters of the model. Another limit to effcient communication can be imposed by competition between intermediaries. We then consider the mechanism design problem for an informed intermediary, and prove that choosing an appropriate system of two-part tariffs allows the intermediary to secure the same payoff as in the optimal direct mechanism. |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:cfr:cefirw:w0121&r=mst |