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on Market Microstructure |
| By: | Bernhardt, Dan (University of Illinois and University of Warwick); Boulatov, Alex (International College of Economics and Finance, Moscow,) |
| Abstract: | We analyze speculation by an informed trader who can commit to her trading strategy in a Kyle-style dealership market. Market makers observe the exact parametric form of the speculator’s trading strategy but not her private information and then price competitively given the net (informed plus noise trade) order flow. We derive necessary and suffcient conditions for the speculator not to profit from commitment. This imposes conditions on model primitives satisfied by Normally-distributed uncertainty that give rise to linear equilibria, but are generically not satisfied. With commitment the speculator may trade less aggressively after some signals, but more aggressively after others. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1553 |
| By: | Daniel Pastorek (Department of Department of Finance and Accounting, Faculty of Business and Economics, Mendel University in Brno, Czech Republic); Peter Albrecht (Department of Department of Finance and Accounting, Faculty of Business and Economics, Mendel University in Brno, Czech Republic) |
| Abstract: | Our study examines to what extent the introduction of Bitcoin spot exchange-traded funds (ETFs) affected Bitcoin’s properties, including market dynamics, volatility, returns, return distribution, and tracking errors. Using block bootstrap simulations, OLS regression, EGARCH modeling, and non-parametric tests, we find that Bitcoin ETFs increase volatility and downside risk while leaving average returns unchanged. Return distribution shifts, including reduced skewness and kurtosis, suggest partial normalization, typically linked to greater liquidity and market participation. However, unlike traditional ETFs, Bitcoin ETFs introduce fail-to-deliver (FTD) occurrences—previously absent in Bitcoin markets—which mitigate extreme price movements through delayed settlement. Tracking error analysis confirms that spot ETFs more accurately track Bitcoin’s price than futures-based ETFs. These findings offer critical insights into Bitcoin ETFs’ market effects, particularly regarding stability and investor behavior. |
| Keywords: | Bitcoin, ETFs, volatility, market dynamics, FTDs |
| JEL: | G11 G12 G14 G23 C58 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:men:wpaper:99_2025 |