|
on Market Microstructure |
| By: | Zagaglia, Paolo |
| Abstract: | I address the role of information heterogeneity in the Euro interbank market for unsecured term lending. I use high-frequency quotes of bid and ask prices to estimate probabilities of informed trading for contract maturities from one month to one year. The dataset spans from November 2000 to March 2008, and includes the relevant events that characterize the developments of the Euro area money market. I obtain four main results. First, I show that the loose supply of liquidity of the ECB has not dampened the distortions arising from asymmetric information in the unsecured money market. I also find that the probability of trading with a better informed bank is higher on days when open market operations take place, and at the end of the maintenance period. This effect has strengthened during the turmoil. The results indicate that information is segmented, in the sense that heterogenous knowledge among banks is maturity-specific. Finally, the paper presents some evidence suggesting that the risk of trading with a counterparty that enjoys an enhanced information set is priced. |
| Keywords: | Market microstructure; PIN model; money markets; term structure |
| JEL: | G14 E52 |
| Date: | 2010–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20415&r=mst |
| By: | Fei Ren; Wei-Xing Zhou |
| Abstract: | We study the statistical properties of the recurrence intervals $\tau$ between successive trading volumes exceeding a certain threshold $q$. The recurrence interval analysis is carried out for the 20 liquid Chinese stocks covering a period from January 2000 to May 2009, and two Chinese indices from January 2003 to April 2009. Similar to the recurrence interval distribution of the price returns, the tail of the recurrence interval distribution of the trading volumes follows a power-law scaling, and the results are verified by the goodness-of-fit tests using the Kolmogorov-Smirnov (KS) statistic, the weighted KS statistic and the Cram{\'{e}}r-von Mises criterion. The measurements of the conditional probability distribution and the detrended fluctuation function show that both short-term and long-term memory effects exist in the recurrence intervals between trading volumes. We further study the relationship between trading volumes and price returns based on the recurrence interval analysis method. It is found that large trading volumes are more likely to occur following large price returns, and the comovement between trading volumes and price returns is more pronounced for large trading volumes. |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1002.1653&r=mst |
| By: | Andrea Petrella; Sandro Sapio |
| Abstract: | How do changes in the market architecture affect the dynamics of deregulated electricity prices? We investigate this issue in the context of the Italian Power Exchange (IPEX), using data on the daily average day-ahead price (PUN) between April 2004 and December 2008. Estimates of baseline time series models (ARMAX and ARMAX-EGARCH) and their forecasting performances suggest that the trend in natural gas prices, deterministic weekly patterns, the impact of perceived temperatures, persistence in conditional volatility and the inverse leverage effect are essential features of the PUN dynamics. We then augment the best-performing models with dummies that account for changes in the market architecture, such as the introduction of contracts for differences (CfDs) to support renewables, trading of white certificates for energy efficiency, and the demandside liberalization. The findings show that changes in the market architecture have only affected the PUN volatility. Specifically, CfDs have mitigated volatility, while white certificates and demand liberalization have increased it. Moreover, after controlling for reforms the inverse leverage effect vanishes, and the persistence in volatility is lower than in the baseline estimates. |
| Keywords: | Electricity prices, Italian Power Exchange, Market architecture, ARMA,EGARCH |
| Date: | 2010–01–22 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2010/03&r=mst |
| By: | Vives, Xavier (IESE Business School) |
| Abstract: | A model is presented of a uniform price auction where bidders compete in demand schedules; the model allows for common and private values in the absence of exogenous noise. It is shown how private information yields more market power than the levels seen with full information. Results obtained here are broadly consistent with evidence from asset auctions, may help explain the response of central banks to the crisis and suggest potential improvements in the auction formats of asset auctions. |
| Keywords: | adverse selection; market power; reverse auctions; bid shading; |
| JEL: | D44 D82 E58 G14 |
| Date: | 2009–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0837&r=mst |