nep-mst New Economics Papers
on Market Microstructure
Issue of 2019‒09‒23
two papers chosen by
Thanos Verousis
  1. Intraday Volume-Volatility Nexus in the FX Markets: Evidence from an Emerging Market By Suleyman Serdengecti; Ahmet Sensoy
  2. Revisiting the stealth trading hypothesis: Does time-varying liquidity explain the size-effect? By Cebiroglu, Gökhan; Hautsch, Nikolaus; Walsh, Christopher
  1. By: Suleyman Serdengecti; Ahmet Sensoy
    Abstract: Using a dataset on local banks' daily FX transaction volume segregated into counterparty and transaction types, this article investigates the relationship between trading volume and intraday realized volatility for the US dollar/Turkish lira parity (USDTRY), one of the most traded emerging market currencies against US dollar. We question whether type of counterparty and transaction affects intraday volume-volatility relationship across various trading sessions around the world. We reveal that only the spot transactions of domestic customers have positive contemporaneous relation with realized volatility and this significance is valid only in global trading sessions that mostly overlap with the local trading hours. Furthermore, we utilize a metric for the belief dispersion on the level of future exchange rate via currency options and find that the dispersion significantly strengthens the volume-volatility nexus, confirming the Dispersion of Beliefs Hypothesis.
    Keywords: FX microstructure, Volume-volatility nexus, Mixture of distribution hypothesis (MDH), Sequential information arrival hypothesis (SIAH), Dispersion of beliefs hypothesis (DBH)
    JEL: G12 G15 D49
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:tcb:wpaper:1928&r=all
  2. By: Cebiroglu, Gökhan; Hautsch, Nikolaus; Walsh, Christopher
    Abstract: Large trades have a smaller price impact per share than medium-sized trades. So far, the literature has attributed this effect to the informational content of trades. In this paper, we show that this effect can arise from strategic order placement. We introduce the concept of a liquidity elasticity, measuring the responsiveness of liquidity demand with respect to changes in liquidity supply, as a major driver for a declining price impact per share. Empirical evidence based on Nasdaq stocks strongly supports theoretical predictions and shows that the aspect of liquidity coor- dination is an important complement to rationales based on asymmetric information.
    Keywords: stealth trading,price impact,liquidity elasticity,limit order book
    JEL: G02 G10 G23
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:zbw:cfswop:625&r=all
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