Three Essays On Hidden Liquidity In Financial Markets
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Three Essays On Hidden Liquidity In Financial Markets
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Author : Gökhan Cebiroglu
language : en
Publisher:
Release Date : 2013
Three Essays On Hidden Liquidity In Financial Markets written by Gökhan Cebiroglu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Three Essays On Financial Market Design Liquidity And Long Term Equity Returns
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Author : Pankaj K. Jain
language : en
Publisher:
Release Date : 2002
Three Essays On Financial Market Design Liquidity And Long Term Equity Returns written by Pankaj K. Jain and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with categories.
Essays On Hidden Liquidity In Limit Order Markets
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Author : John Ritter
language : en
Publisher:
Release Date : 2016
Essays On Hidden Liquidity In Limit Order Markets written by John Ritter and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with Liquidity (Economics) categories.
"This dissertation consists of three chapters that examine the use of hidden liquidity in limit order markets. Chapter 1 models a dynamic limit order market to study how the ability to hide a limit order affects market quality and traders' behavior. In the model, traders vary in the speed with which they can adjust their limit orders (Fast and Slow traders) and in the information they possess about the fundamental value of the asset (Informed and Uninformed traders). The model predicts that Fast traders are more likely to conceal their limit orders than Slow traders, since they can adjust their hidden orders quicker if they lose priority to displayed orders. Hidden orders in the limit order book make it more difficult for Uninformed traders to infer the fundamental value of the asset, which causes Informed traders to conceal their limit orders more than Uninformed traders. The model also predicts that there is not a significant difference in market quality between a transparent market that only allows displayed orders and an opaque market that allows traders the option to conceal their limit orders. Surprisingly, the profits of Informed traders are lower in an opaque market, because Uninformed traders can better infer the fundamental value of the asset due to Informed traders increasing the aggressiveness of their displayed limit orders. Chapter 2 examines how the speed of market participants affects the decision to conceal a limit order. In terms of the order initiator, I find that traders with a speed advantage, high-frequency traders (HFTs), are more likely to hide an order in the limit order book, but slower traders, non-high frequency traders (NHFTs), are more likely to hide an order when supplying liquidity in a trade. This difference occurs because NHFTs are more likely to conceal their aggressively priced limit orders, which reduces their adverse selection costs. Hiding a limit order does not reduce the adverse selection faced by HFTs, who are more likely to conceal their less aggressively priced limit orders. In terms of other market participants, I find that the limit orders of both HFTs and NHFTs are less likely to be concealed as the proportion of trading volume in which HFTs participate increases. Overall, these findings suggest that the speed of both the order initiator and other market participants affect a trader's decision to conceal their limit order. Chapter 3 investigates if informed liquidity suppliers display or hide their limit orders. I find that imbalances in hidden liquidity in the limit order book predict returns at both the intraday and daily levels, while imbalances in displayed liquidity do not. This relationship remains robust after controlling for liquidity, order flow, and past returns. I examine hidden imbalances around earnings announcements and find that long-short portfolios based on the average hidden imbalance during the two days prior to the earnings announcement earn the greatest returns for announcements with the largest earnings surprise. I also examine hidden liquidity supplied by highfrequency traders (HFTs) and non-high frequency traders (NHFTs) and find that imbalances in the hidden liquidity supplied by NHFTs predict returns at the intraday level, while imbalances in the hidden liquidity supplied by HFTs do not. These results are consistent with the hypothesis that informed NHFTs, who possess longlived information compared to HFTs, supply liquidity using hidden orders to prevent information leakage."--Pages iv-v.
Essays On Liquidity In Financial Markets
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Author : Jördis Hengelbrock
language : en
Publisher:
Release Date : 2009
Essays On Liquidity In Financial Markets written by Jördis Hengelbrock and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
Essays On Liquidity In Financial Markets
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Author : Pierre-Olivier Weill
language : en
Publisher:
Release Date : 2004
Essays On Liquidity In Financial Markets written by Pierre-Olivier Weill and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with categories.
Essays On Liquidity In Financial Markets
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Author : John Brendan McDermott
language : en
Publisher:
Release Date : 2000
Essays On Liquidity In Financial Markets written by John Brendan McDermott and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with Investments categories.
Essays On Liquidity In Financial Markets
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Author : Christoph Koser
language : en
Publisher:
Release Date : 2020
Essays On Liquidity In Financial Markets written by Christoph Koser and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
"This dissertation contributes to a better understanding of liquidity in financial markets. Relying on the latest proxies for liquidity and TAQ benchmark data, this dissertation investigates liquidity in financial markets from different perspectives and gives answers to crucial challenges when assessing the importance of liquidity; its time-varying commonality across assets and stock markets; its impact on asset pricing in abnormal market states and finally its dynamics and determinants on a daily basis. This study has implications for investors and market makers as part of risk management and portfolio diversification and for policy makers in the context of designing optimal regulatory frameworks to predict and prevent common sources of liquidity tightness in global financial markets. In the second chapter, I study commonality in liquidity and its association to market volatility. Taking on a global perspective on this matter and examining nine major stock markets, I first construct a novel and dynamic measure of commonality in liquidity. I show that liquidity commonality is present in global stock markets and increases parallel to crisis periods. This finding points towards abrupt changes in liquidity fundamentals and clearly provide evidence for demand- and supply-driven sources of commonality in liquidity (i.e. correlated trading behavior on institutional level paired with restrictions on funding capital) on a global scale. Driven by the well acknowledged findings of a positive relationship between volatility and illiquidity, I investigate the time-varying tie between common variation in liquidity and volatility. Using a dynamic granger-causality test, I find that global market volatility always causes commonality in liquidity while commonality in liquidity causes volatility only in sub-periods, spanning over the financial crisis and its aftermath period. In the third chapter, I examine the effect of systemic liquidity risk as a priced risk factor in asset pricing. Hereby, I challenge the previous literature in their finding of a linear relationship between systemic liquidity risk and asset prices. I show that systemic liquidity risk is not always a priced factor in the explanation of asset prices. I find that systemic liquidity risk and asset prices are negatively associated in bad market states. This finding can be explained by downward trended liquidity spirals, in other words, an interaction between demand and supply-sided commonality in liquidity, which cause a depression in asset pricing during bad market states. I also show that liquidity risk has a positive link to asset pricing in good market states, which is mainly associated with search-for-yield considerations. Finally, I document that there is no significant relationship between systemic liquidity risk and asset pricing during normal market swings. This finding supports the initial claim that market participants do not worry too much about the state of market-wide liquidity during regular times. In the fourth chapter, I investigate daily liquidity and trading activity of energy stocks traded at U.S. stock exchanges, categorized into five energy sectors, that is, oil and gas, coal mining, renewables, electric- and multi-utilities. Using TAQ (trades and quotes) data, I examine various dimensions of liquidity and trading - effective spreads, price impact of trades, number of trades and volume - on sectoral level. I document cross-sectional differences in the level of liquidity and trading across energy stock segments. I find that liquidity and trading is trended and exhibit serial dependency up to higher lags, similarly across sectors. There is a weekly pattern for trading and liquidity, both decline on Fridays, on average. I also identify a number of factors that affect trading and liquidity commonly across sectors, that is, general market movements, short-term momentum runs and overall stock market volatility, which points again towards the direction of correlated trading, amplified by institutional investors. Moreover, I show that trading and liquidity are sensitive to a widening Term Spread. I find a heterogeneous effect of the oil price on liquidity and trading activity, dependent on the energy segment. Despite controlling for stock market volatility, I observe that illiquidity and trading increase with higher levels of oil price volatility. Finally, I show that trading activity, both, in number of trade executions and share volume, increases for renewable and multi-utility stocks when climate change receives global media attention. Fast markets and increased trading make liquidity to be one of the top considerations in the smooth functioning of financial markets, especially in the light of financial distress and sudden, downward trended liquidity spirals, where liquidity adjusts to different equilibria levels. For future discussion, there is further need to address liquidity in its different dimensions and in the context of financial market quality, information efficiency and sentiment. This dissertation is yet another step for a more comprehensive knowledge on liquidity." -- TDX.
Towards A Better Understanding Of Liquidity Trading Behavior And Stock Returns
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Author : Wenjin Kang
language : en
Publisher:
Release Date : 2004
Towards A Better Understanding Of Liquidity Trading Behavior And Stock Returns written by Wenjin Kang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Capital market categories.
Essays On Liquidity In Financial Markets
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Author : Chitrupa Sudarshan Fernando
language : en
Publisher:
Release Date : 1991
Essays On Liquidity In Financial Markets written by Chitrupa Sudarshan Fernando and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1991 with categories.
Three Essays On Liquidity In The Fixed Income Markets
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Author : Liang Guo
language : en
Publisher:
Release Date : 2013
Three Essays On Liquidity In The Fixed Income Markets written by Liang Guo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
My dissertation looks at the liquidity issues in the fixed-income markets during the recent subprime crisis. It contains three chapters. The recent crisis has resulted in many observed deviations in relative asset price. The first two chapters study how liquidity crisis affects the relative asset pricing in the fixed-income market. Chapter 1 looks at two relative assets, Credit default swap (CDS) and its corresponding reference corporate bond, and I observe huge negative deviations in the arbitrage based parity relationship between CDS price and corresponding corporate bond yield spreads for the period 6/2008 to 9/2009. And Chapter 2 examines credit spreads between corporate bond yields and treasury bond yields. I found some instance of negative credit spreads during the financial crisis. However, all those observations in these two chapters are not consistent with the arbitrage-based pricing theory and, therefore, have drawn the attention of policy makers and market participants alike. In those two chapters I propose that arbitrage trading is also risky and constraint. In particular, I focus on the types of liquidity-funding and asset specific liquidity and their role in determining relative asset prices. I provide the empirical evidence that the observation of arbitrage mispricing between two relative assets in the credit risk market can be explained by the funding liquidity constraints and asset specific liquidity constraints during the recent financial crisis period. Collectively my analysis contributes to a recent debate regarding the impact of liquidity on relative asset prices. Chapter 3 investigates the impact of parameter uncertainty on corporate bond liquidity before and after the onset of the recent crisis. Using monthly corporate bond data for the period 2005 to 2010, firm level parameters implied by a structural model of corporate debt are used to construct proxies for parameter uncertainty. I find that uncertainty about firm parameters decreases trading volume but increases bid-ask spreads and pricing bouncing in the cross-section and across time. Parameter uncertainty increases during the crisis period, and negatively impacts market liquidity. But there is weak evidence that parameter uncertainty may help forecast liquidity in the corporate bond market. Collectively the empirical results provide a rationale for time-varying liquidity dynamics in the corporate bond market.
