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on Market Microstructure |
| By: | Naohiro Yoshida |
| Abstract: | This paper proposes a simple and parsimonious discrete-time simulation model to describe the endogenous formation and periodic collapse of financial bubbles. While existing literature has extensively explored the statistical properties of locally explosive bubble dynamics, capturing the micro-level interplay of investor herd behavior and panic selling within a unified framework remains a challenge. Our model addresses this by introducing a cubic function of market momentum to determine the balance of trading directions. This mechanism drives both trend-following behavior during the bubble phase and sudden market crashes when the momentum exceeds a critical threshold. Furthermore, inspired by the self-exciting nature of the Hawkes process, the model endogenizes``market frenzy" by linking trading frequency directly to the accumulated momentum. Simulation results demonstrate that this minimal setup successfully replicates the complex, nonlinear dynamics of bubbles, including simultaneous surges in liquidity and price, followed by dramatic crashes. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.00854 |
| By: | Mathias Mesfin |
| Abstract: | This paper tests whether intraday momentum signals derived from open-high-low-close-volume (OHLCV) data produce a statistically significant trading edge in Micro E-mini Nasdaq 100 futures (MNQ) under realistic execution constraints. Using 947 trading days of five-minute data (2021-2025), fourteen signal families are evaluated, including opening range breakouts, gap strategies, volume signals, cross-session momentum, liquidity grabs, volatility-conditioned classifiers, and news-driven strategies. All signals are assessed using strict institutional criteria: out-of-sample walk-forward validation, minimum T-statistic of 2.0, at least 30 trades, positive net return after a fixed two-point round-trip cost, and multi-year stability. No signal satisfies all criteria simultaneously. The gross edge available to next-bar-open execution is constrained to approximately 0.07-1.50 points per trade, insufficient to overcome transaction costs. A gap-continuation signal achieves T = 3.23 and +14.52 points but fails minimum sample requirements (N = 22). Two validated signals from a separate research program are included as positive controls, confirming the methodology detects genuine edge when present. The primary contribution is a reproducible falsification framework and a documented null result, highlighting structural limits of OHLCV-based intraday strategies. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.04004 |
| By: | Ketan B. Patel |
| Abstract: | This paper examines whether the SEC’s mandate for central clearing of U.S. Treasury repo transactions could enable all-to-all trading and support the development of a standardized term repo market. By mitigating counterparty risk through central clearing, cash lenders may become more willing to transact directly with a broader set of borrowers, reducing reliance on dealer intermediation. Clearing may also encourage greater participation in term repos beyond overnight tenors if counterparty risk is reduced. However, for all-to-all trading to take hold, the market must adopt more standardized contract terms, collateral schedules, and operational protocols, such as consolidated trade execution and post-trade processing. If these structural and operational hurdles are addressed, an all-to-all term repo market could emerge—enhancing liquidity, reducing rollover risk, and improving the resilience of the U.S. financial system. |
| Keywords: | Central clearing; U.S. treasury repo; Financial Resilience; Central counterparty (CCP); Regulatory reform; all-to-all |
| JEL: | D47 E43 E44 G12 G18 G23 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedhwp:103255 |
| By: | Mariana Escobar; Lorenzo Pandolfi; Alvaro Pedraza; Tomas Williams |
| Abstract: | Benchmark index rebalancings are widely used to study non-fundamental demand shocks, but the underlying trading is rarely observed. Exploiting transaction-level data from the Colombian stock market and additions and deletions of stocks from MSCI international equity indexes, we trace who generates benchmark-driven demand, who absorbs it, and how it affects prices. Index demand extends beyond explicit index funds and ETFs: benchmarked but nominally active foreign institutions account for most rebalancing-driven trading. Domestic investors absorb most of the shock, while arbitrage capital plays only a limited role. We show that stock demand curves are steep, especially when retail participation is larger. |
| Keywords: | index rebalancings; institutional investors; stock demand elasticity; passive funds; benchmarking; inelastic market hypothesis. |
| JEL: | F32 G11 G15 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:gwc:wpaper:2026-008 |