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on Market Microstructure |
| By: | Celso Brunetti; Bahattin Buyuksahin; Jeffrey H. Harris |
| Abstract: | We analyze data from 2005 through 2009 that uniquely identify categories of traders to assess how speculators such as hedge funds and swap dealers relate to volatility and price changes. Examining various subperiods where price trends are strong, we find little evidence that speculators destabilize financial markets. To the contrary, hedge funds facilitate price discovery by trading with contemporaneous returns while serving to reduce volatility. Swap dealer activity, however, is largely unrelated to both contemporaneous returns and volatility. Our evidence is consistent with the hypothesis that hedge funds provide valuable liquidity and largely serve to stabilize futures markets. |
| Keywords: | International topics, Recent economic and financial developments |
| JEL: | C3 G1 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:15-42&r=mst |
| By: | Naoto Kunitomo (Faculty of Economics, The University of Tokyo); Daisuke Kurisu (Graduate School of Economics, The University of Tokyo) |
| Abstract: | Several new statistical procedures for high frequency financial data analysis have been developed for estimating risk quantities and testing the presence of jump in the underlying continuous-time financial processes. Although the role of micro-market noise is important in high frequency financial data, there are some basic questions on the effects of presence of noise and jump in the underlying stochastic processes. When there can be jump and (micro-market) noise at the same time, it is not obvious whether the existing statistical methods are reliable or not for the applications in actual data analysis. We investigate the misspecification effects of jump and noise on some basic statistics and the testing procedures for jumps proposed by Ait-Sahalia and Jacod (2009, Annals of Statistics) as an illustration. We have found that their firrst test is asymptotically robust in the small-noise asymptotic sense against possible misspecification while their second test is quite sensitive to the presence of noise. |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2015cf996&r=mst |
| By: | Jean-David Fermanian; Olivier Gu\'eant; Arnaud Rachez |
| Abstract: | For the last two decades, most financial markets have undergone an evolution toward electronification. The market for corporate bonds is one of the last major financial markets to follow this unavoidable path. Traditionally quote-driven (that is, dealer-driven) rather than order-driven, the market for corporate bonds is still mainly dominated by voice trading, but a lot of electronic platforms have emerged that make it possible for buy-side agents to simultaneously request several dealers for quotes, or even directly trade with other buy-siders. The research presented in this article is based on a large proprietary database of requests for quotes (RFQ) sent, through the multi-dealer-to-client (MD2C) platforms operated by Bloomberg Fixed Income Trading and Tradeweb, to one of the major liquidity providers in European corporate bonds. Our goal is (i) to model the RFQ process on these platforms and the resulting competition between dealers, (ii) to use the RFQ database in order to implicit from our model the behavior of both dealers and clients on MD2C platforms, and (iii) to study the influence of several bond characteristics on the behavior of market participants. |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1511.07773&r=mst |