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Price-Setting in the Foreign Exchange Swap Market: Evidence from Order Flow 外汇掉期市场的价格设定:来自订单流的证据
Warwick Business School Finance Group Research Paper Series Pub Date : 2020-10-27 DOI: 10.2139/ssrn.3720062
O. Syrstad, Ganesh Viswanath-Natraj
{"title":"Price-Setting in the Foreign Exchange Swap Market: Evidence from Order Flow","authors":"O. Syrstad, Ganesh Viswanath-Natraj","doi":"10.2139/ssrn.3720062","DOIUrl":"https://doi.org/10.2139/ssrn.3720062","url":null,"abstract":"This paper investigates price discovery in foreign exchange (FX) swaps. Using data on inter-dealer transactions, we find a 1 standard deviation increase in order flow (i.e. net pressure to obtain USD through FX swaps) increases the cost of dollar funding by up to 4 basis points after the 2008 crisis. This is explained by increased dispersion in dollar funding costs and quarter-end periods. We find central bank swap lines reduced the order flow to obtain USD through FX swaps, subsequently affecting the forward rate. In contrast, during quarter-ends and monetary announcements we observe high frequency adjustment of the forward rate.","PeriodicalId":381400,"journal":{"name":"Warwick Business School Finance Group Research Paper Series","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-10-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116033384","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 4
What Matters When? Time-Varying Sparsity in Expected Returns 什么时候重要?期望收益的时变稀疏性
Warwick Business School Finance Group Research Paper Series Pub Date : 2019-08-17 DOI: 10.2139/ssrn.3438754
Daniele Bianchi, M. Büchner, A. Tamoni
{"title":"What Matters When? Time-Varying Sparsity in Expected Returns","authors":"Daniele Bianchi, M. Büchner, A. Tamoni","doi":"10.2139/ssrn.3438754","DOIUrl":"https://doi.org/10.2139/ssrn.3438754","url":null,"abstract":"We provide a measure of sparsity for expected returns within the context of classical factor models. Our measure is inversely related to the percentage of active predictors. Empirically, sparsity varies over time and displays an apparent countercyclical behavior. Proxies for financial conditions and for liquidity supply are key determinants of the variability in sparsity. Deteriorating financial conditions and illiquid times are associated with an increase in the number of characteristics that are useful to predict anomaly returns (i.e., the forecasting model becomes more dense). Looking at specific categories of characteristics, we find that variables classified as value, trading frictions and, in particular, profitability are robustly present throughout the sample. A strategy that exploits the dynamics of sparsity to time factors delivers substantial economic gain out-of-sample relative to both a random walk and a simple rolling window shrinkage estimator as well as standard models based on preselected, well-know characteristics like size, momentum, book-to-market, investment and accruals.","PeriodicalId":381400,"journal":{"name":"Warwick Business School Finance Group Research Paper Series","volume":"33 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-08-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122757828","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 4
Optimal Security Design Under Asymmetric Information and Profit Manipulation 信息不对称和利润操纵下的最优安全设计
Warwick Business School Finance Group Research Paper Series Pub Date : 2014-07-01 DOI: 10.2139/ssrn.2565739
Kostas Koufopoulos, R. Kozhan, G. Trigilia
{"title":"Optimal Security Design Under Asymmetric Information and Profit Manipulation","authors":"Kostas Koufopoulos, R. Kozhan, G. Trigilia","doi":"10.2139/ssrn.2565739","DOIUrl":"https://doi.org/10.2139/ssrn.2565739","url":null,"abstract":"We consider a model of external financing under ex ante asymmetric information and profit manipulation (non verifability). Contrary to conventional wisdom, the optimal contract is not standard debt, and it is not monotonic. Instead, it resembles a contingent convertible (CoCo) bond. In particular: (i) if the profit manipulation and/or adverse selection are not severe, there exists a unique separating equilibrium in CoCos; (ii) in the intermediate region, if the distribution of earnings is unbounded above there exists a unique pooling equilibrium in CoCos, otherwise debt might be issued but it is never the unique equilibrium; (iii) finally, if profit manipulation is severe, there is no financing. These findings suggest that the standard monotonicity constraint exogenously imposed in the security design literature must be reconsidered. Crucially, profit manipulation is part of the optimal contract, and non-monotonic, convertible securities mitigate the asymmetric information problem. We discuss milestone payments in venture capital as an application.","PeriodicalId":381400,"journal":{"name":"Warwick Business School Finance Group Research Paper Series","volume":"99 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123015907","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 6
The Externalities of High Frequency Trading 高频交易的外部性
Warwick Business School Finance Group Research Paper Series Pub Date : 2013-08-07 DOI: 10.2139/ssrn.2066839
Mao Ye, Chengxi Yao, J. Gai
{"title":"The Externalities of High Frequency Trading","authors":"Mao Ye, Chengxi Yao, J. Gai","doi":"10.2139/ssrn.2066839","DOIUrl":"https://doi.org/10.2139/ssrn.2066839","url":null,"abstract":"When price competition is constrained by tick size, speed allocates the resources due to the time priority rule. We demonstrate three implications of competition in speed. 1) We find more high frequency liquidity provision for lower price stocks with high market cap, where the one cent tick size has a higher constraint on price competition. 2) Speed has no impact on (the price) of liquidity, because speed competition already implies that liquidity providers cannot undercut each other’s price. We find that exogenous technology improvements improving speed at a one millisecond, microsecond or nanosecond level do not lead to improvements on quoted spread, effective spread, trading volume or variance ratio. However, the cancellation/execution ratio increases, short term volatility increases and market depth decreases. 3) It is relative speed that matters. We find evidence consistent with the quote stuffing hypothesis (Biais and Woolley, 2011) using NASDAQ channel assignment as identification. Competition in speed but not price leads to externalities based on the canonical definition of Laffont (2008). One possible policy solution is the deregulation of tick size or decrease the importance of time priority.","PeriodicalId":381400,"journal":{"name":"Warwick Business School Finance Group Research Paper Series","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-08-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125407153","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 159
Signalling under Uncertainty: The Case of IFRS Adoption 不确定性下的信号:采用国际财务报告准则的案例
Warwick Business School Finance Group Research Paper Series Pub Date : 2013-04-23 DOI: 10.2139/ssrn.2255564
Osman Ghani
{"title":"Signalling under Uncertainty: The Case of IFRS Adoption","authors":"Osman Ghani","doi":"10.2139/ssrn.2255564","DOIUrl":"https://doi.org/10.2139/ssrn.2255564","url":null,"abstract":"This paper examines the liquidity, Tobin’s Q, and cost of equity effects from voluntary and mandatory IFRS adoption. In contrast to prior work, we focus on the firm level heterogeneity in the economic consequences, recognising that the level of uncertainty avoidance (UAI) in a country will influence the economic consequences derived from implementing the new standards. Country level uncertainty avoidance is predicted to lead to lower liquidity and Tobin’s Q, and a higher cost of equity for mandatory adopters in higher UAI countries, while higher UAI is expected to benefit voluntary adopters in terms of higher liquidity and Tobin’s Q, and a lower cost of equity. To test these predictions, we partition the firms into non-adopters, voluntary adopters, and mandatory adopters and also classify firms according to the change in their financial reporting quality. We analyse whether capital markets effects are different across the various groups based on the level of uncertainty avoidance in the host country. We find that prior to the mandatory adoption of IFRS by the EU member states, voluntary adopters in higher UAI countries benefited from increased liquidity and Tobin’s Q, compared to identical firms in lower UAI countries, mandatory adopters and non-adopters. However, we find that this result is not persistent post the EU mandate, and that UAI influences both mandatory and voluntary adopters in a similar manner post 2005. The results from the cost of equity analysis suggest that market participants treat mandatory and voluntary adopters in an almost identical manner and that a higher UAI leads to both groups of firms exhibiting a reduction in their cost of equity. Our findings imply that uncertainty avoidance is able to explain part of the heterogeneity exhibited in the capital market outcomes between firms and across countries that have adopted IFRS.","PeriodicalId":381400,"journal":{"name":"Warwick Business School Finance Group Research Paper Series","volume":"49 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-04-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122936958","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Execution Risk in High-Frequency Arbitrage 高频套利的执行风险
Warwick Business School Finance Group Research Paper Series Pub Date : 2012-03-29 DOI: 10.2139/ssrn.2030767
R. Kozhan, W. Tham
{"title":"Execution Risk in High-Frequency Arbitrage","authors":"R. Kozhan, W. Tham","doi":"10.2139/ssrn.2030767","DOIUrl":"https://doi.org/10.2139/ssrn.2030767","url":null,"abstract":"In this paper, we investigate the role of execution risk in high-frequency trading through arbitrage strategies. We show that if rational agents face uncertainty about completing their arbitrage portfolios, then arbitrage is limited even in markets with perfect substitutes and convertibility. Using a simple model, we demonstrate that this risk arises from the crowding effect of competing arbitrageurs entering the same trade and inflicting negative externalities on each other. Our empirical results provide evidence that support the relevance of execution risk in high-frequency arbitrage. \u0000 \u0000This paper was accepted by Wei Xiong, finance.","PeriodicalId":381400,"journal":{"name":"Warwick Business School Finance Group Research Paper Series","volume":"47 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-03-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124891066","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 64
Optimal Retirement and Saving with Increasing Longevity 随着寿命的延长，最佳退休和储蓄
Warwick Business School Finance Group Research Paper Series Pub Date : 2011-03-02 DOI: 10.2139/ssrn.1857565
Michael Moore, D. Bloom, D. Canning
{"title":"Optimal Retirement and Saving with Increasing Longevity","authors":"Michael Moore, D. Bloom, D. Canning","doi":"10.2139/ssrn.1857565","DOIUrl":"https://doi.org/10.2139/ssrn.1857565","url":null,"abstract":"We develop a simple life cycle optimizing model of retirement and savings. We show that, in theory, higher incomes lead to earlier retirement and higher savings while longer life spans lead to later retirement and lower savings. We calibrate our model using data from the United States and find that the model predicts that over the last century the effect of rising incomes has been twice as large as the effect of the secular rise in life expectancy.","PeriodicalId":381400,"journal":{"name":"Warwick Business School Finance Group Research Paper Series","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-03-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129024021","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 5
Beatlestrap
Warwick Business School Finance Group Research Paper Series Pub Date : 2010-10-19 DOI: 10.2139/ssrn.1711400
Alessandro Palandri
{"title":"Beatlestrap","authors":"Alessandro Palandri","doi":"10.2139/ssrn.1711400","DOIUrl":"https://doi.org/10.2139/ssrn.1711400","url":null,"abstract":"The bootstrap of test statistics requires the re-estimation of the model's parameters for each bootstrap sample. When parameter estimates are not available in closed form, this procedure becomes computationally demanding as each replication requires the numerical optimization of an objective function. This paper investigates the feasibility of the Beatlestrap, an optimization-free approach to bootstrap. It is shown that, ex-post, M-estimators may be expressed in terms of simple arithmetic averages therefore reducing the bootstrap of Wald statistics to the bootstrap of averages. Similarly, it is shown how the Lagrange Multiplier and the Likelihood Ratio statistics may be bootstrapped bypassing the objective function's multiple optimizations. The proposed approach is extended to simulation based Indirect Estimators. The finite sample properties of Beatlestrap are investigated via Monte Carlo simulations.","PeriodicalId":381400,"journal":{"name":"Warwick Business School Finance Group Research Paper Series","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-10-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128753164","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
How Riskless is 'Riskless' Arbitrage? “无风险”套利有多无风险?
Warwick Business School Finance Group Research Paper Series Pub Date : 2010-01-21 DOI: 10.2139/ssrn.1540693
R. Kozhan, W. Tham
{"title":"How Riskless is 'Riskless' Arbitrage?","authors":"R. Kozhan, W. Tham","doi":"10.2139/ssrn.1540693","DOIUrl":"https://doi.org/10.2139/ssrn.1540693","url":null,"abstract":"In this paper, we challenge the notion that exploiting “riskless” arbitrage is riskless. We show that if rational agents face uncertainty about completing their arbitrage portfolios, then arbitrage is limited even in markets with perfect substitutes and convertibility. We call this phenomenon “execution risk” in arbitrage exploitation. Using a simple model, we demonstrate that this risk arises from the crowding effect of competing arbitrageurs entering the same trade and inflicting negative externalities on each other. We argue that the cost of illiquidity and holding inventory are potential negative externalities. Our empirical results provide evidence that support the relevance of execution risk in arbitrage.","PeriodicalId":381400,"journal":{"name":"Warwick Business School Finance Group Research Paper Series","volume":"31 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-01-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114349542","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 2
The Effects of Interest Rate Movements on Assets’ Conditional Second Moments 利率变动对资产条件第二时刻的影响
Warwick Business School Finance Group Research Paper Series Pub Date : 2009-07-27 DOI: 10.2139/ssrn.1447342
Alessandro Palandri
{"title":"The Effects of Interest Rate Movements on Assets’ Conditional Second Moments","authors":"Alessandro Palandri","doi":"10.2139/ssrn.1447342","DOIUrl":"https://doi.org/10.2139/ssrn.1447342","url":null,"abstract":"This paper investigates whether the short term interest rate may explain the movements observed in the conditional second moments of asset returns. The theoretical connections between these seemingly unrelated quantities are studied within the C-CAPM framework. Under the assumption that the product of the relative risk aversion coefficient and the marginal utility is monotonic in consumption, original results are derived that attest the existence of a relation between the risk-free rate and the conditional second moments. The empirical findings, involving 165 stock returns quoted at the NYSE, confirm that, at low frequencies, the interest rate is a determinant of the 165 conditional variances and 13530 conditional correlations.","PeriodicalId":381400,"journal":{"name":"Warwick Business School Finance Group Research Paper Series","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-07-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128044608","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 4
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