Download or read book Heterogeneity in Decentralized Asset Markets written by Julien Hugonnier and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Heterogeneity in Decentralized Asset Markets written by Julien Hugonnier and published by . This book was released on 2014 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study a search and bargaining model of an asset market, where investors' heterogeneous valuations for the asset are drawn from an arbitrary distribution. Our solution technique renders the analysis fully tractable and allows us to provide a full characterization of the equilibrium, in closed form, both in and out of steady state. We use this characterization for two purposes. First, we establish that the model can naturally account for a number of stylized facts that have been documented in empirical studies of over-the-counter asset markets. In particular, we show that heterogeneity among market participants implies that assets are reallocated through "intermediation chains," ultimately producing a core-periphery trading network and non-trivial distributions of prices and trading times. Second, we show that the model generates a number of novel results that underscore the importance of heterogeneity in decentralized markets. We highlight two: first, heterogeneity magnifies the price impact of search frictions; and second, search frictions have larger effects on price levels than on price dispersion. Hence, quantifying the price discount or premium created by search frictions based on observed price dispersion can be misleading.

Download or read book Heterogeneity of Beliefs and Trade in Experimental Asset Markets written by Tim A. Carle and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Investor Heterogeneity Asset Markets written by and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Heterogeneous Consumers Segmented Asset Markets and the Effects of Monetary Policy written by Zeno Enders and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Pricing and Liquidity in Decentralized Asset Markets written by Semih Uslu and published by . This book was released on 2019 with total page 123 pages. Available in PDF, EPUB and Kindle. Book excerpt: I develop a search-and-bargaining model of endogenous intermediation in over-the-counter markets. Unlike the existing work, my model allows for rich investor heterogeneity in three simultaneous dimensions: preferences, inventories, and meeting rates. By comparing trading-volume patterns that arise in my model and are observed in practice, I argue that the heterogeneity in meeting rates is the main driver of intermediation patterns. I fi nd that investors with higher meeting rates (i.e., fast investors) are less averse to holding inventories and more attracted to cash earnings, which makes the model corroborate a number of stylized facts that do not emerge from existing models: (i) fast investors provide intermediation by charging a speed premium, and (ii) fast investors hold more extreme inventories. Then, I use the model to study the effect of trading frictions on the supply and price of liquidity. On social welfare, I show that the interaction of meeting rate heterogeneity with optimal inventory management makes the equilibrium ine fficient. I provide a financial transaction tax/subsidy scheme that corrects this ine fficiency, in which fast investors cross-subsidize slow investors.

Download or read book Long Run Heterogeneity in an Exchange Economy with Fixed Mix Traders written by Giulio Bottazzi and published by . This book was released on 2016 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider an exchange economy with heterogeneous agents and multiple assets and investigate the coupled dynamics of assets' prices and agents' wealth. We assume that agents have heterogeneous beliefs and invest on each asset a fraction of wealth proportional to its expected dividends. Our main finding is that long-run coexistence of heterogeneous agents is a generic outcome of the market dynamics. We provide sufficient conditions for the latter, as well as sufficient conditions for the relative wealth of any given agent converging to zero or to one. Since we use a direct approach that combines the inter-temporal dynamics of wealth and prices via agents' portfolio rules, we can characterize when long-run heterogeneity occurs for both complete and incomplete asset markets.

Download or read book Heterogeneity Market Mechanisms and Asset Price Dynamics written by Carl Chiarella and published by . This book was released on 2009 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: This chapter surveys the boundedly rational heterogeneous agent (BRHA) models of financial markets, to the development of which the authors and several co-authors have contributed in various papers. We give particular emphasis to role of the market clearing mechanism used, the utility function of the investors, the interaction of price and wealth dynamics, portfolio implications, the impact of stochastic elements on the markets dynamics, and calibration of this class of models. Due to agents' behavioural features and market noise, the BRHA models are both nonlinear and stochastic. We show that the BRHA models produce both a locally stable fundamental equilibrium corresponding to that of standard paradigm, as well as instability with a consequent rich range of possible complex behaviours characterised both indirectly by simulation and directly by stochastic bifurcations. A calibrated model is able to reproduce quite well the stylized facts of financial markets. The BRHA framework is thus able to accommodate market features that seem not easily reconcilable for the standard financial market paradigm, such as fat tail, volatility clustering, large excursions from the fundamental and bubbles.

Download or read book Investor Heterogeneity Trading Volume and Asset Pricing written by Takeshi Yamada and published by . This book was released on 1993 with total page 106 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Implications of Heterogeneity in Preferences Beliefs and Asset Trading Technologies for the Macroeconomy written by Yi Li Chien and published by . This book was released on 2014 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper extends the methodology developed in Chien, Cole and Lustig (2011 & 2012) (hereafter CCL2011 and CCL2012, respectively) to analyze and compute the equilibria of economies with heterogeneous agents who have different asset trading technologies and are subject to both aggregate and idiosyncratic income risk. The different asset trading technologies, which are designed to replicate the portfolio behavior seen in the data, fall into two classes. Active traders manage the composition of their portfolios among a given set of assets in addition to choosing how much to save. Passive traders take their portfolio composition as given and choose only how much to save. There can be a wide variety of different cases within each classes. For active traders, the trading technology varies depending on the set of assets that they can use, while for passive traders it varies with the specific portfolio composition rule. In CCL2011 and CCL2012, all of our agents had to have the same CRRA flow utility functions, discount rates, and beliefs. In this extension, this restriction is relaxed greatly extending the set of economies to which our method applies. This richer degree of heterogeneity allows the model to match a number of key features of the data.

Download or read book Heterogeneity in Financial Markets written by Bart Frijns and published by . This book was released on 2011 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Trading Heterogeneity Information Transparency and Market Efficiency written by Huanhuan Zheng and published by . This book was released on 2015 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: Market inefficiency provides an opportunity for rational arbitrage. Nonetheless, investors may not necessarily act on such information even if they are informed. Instead, they extrapolate what the others are doing and decide strategically whether to do rational arbitrage or irrational speculation. As the market becomes more inefficient, coordination on rational arbitrage generates a higher probability of moving the price towards its efficient equilibrium, which increases investors' incentive to do rational arbitrage. The collective actions of all investors feedback on the asset price and therefore the market efficiency, which then affects investors' subsequent actions. The dynamic interaction between heterogeneous trading and market efficiency contribute to asset price bubbles and depressions. Increasing information transparency magnifies bubbles and depressions.

Download or read book Frictional Intermediation in Over the counter Markets written by Julien Hugonnier and published by . This book was released on 2018 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt: We extend Duffie, Garleanu, and Pedersen's (2005) search-theoretic model of over-the-counter asset markets, allowing for a decentralized inter-dealer market with arbitrary heterogeneity in dealers' valuations or inventory costs. We develop a solution technique that makes the model fully tractable and allows us to derive, in closed form, theoretical formulas for key statistics analyzed in empirical studies of the intermediation process in OTC market. A calibration to the market for municipal securities reveals that the model can generate trading patterns and prices that are quantitatively consistent with the data. We use the calibrated model to compare the gains from trade that are realized in this frictional market with those from a hypothetical, frictionless environment, and to distinguish between the quantitative implications of various types of heterogeneity across dealers.

Download or read book Trading in Decentralized Asset Markets written by and published by . This book was released on 2013 with total page 178 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first chapter of this dissertation I study an alternating offer game between an investor and a dealer who decide the price and the quantity of an asset to be traded. Investor and dealer are different in their ability to trade the asset. The dealer has access to an interdealer market where he can continuously trade at a given price. The investor can meet other dealers with access to the same market between rounds of offers. After an agreement is reached, investor's valuation may change. In such case she will be involved in a new alternating offer game to trade the amount of the asset bought during the current game. I characterize the effect of the meeting rate with dealers on the price and the quantity traded in the unique stationary equilibrium with frequent offers. I show that transaction prices are closer to the price in the interdealer market and investors trade larger amounts when the arrival rate of dealers increases. In the second chapter I analyze whether order size responds to trading frictions. The theory developed in Chapter 1 suggests that investors should optimally trade smaller amounts in markets in which it is harder to find a dealer to trade with. This chapter tests this prediction in the US municipal bond market. Using several proxies based on asset liquidity, bid-ask spreads and price discovery, I show that bonds with higher trading frictions are also traded in smaller amounts. In the last chapter I develop a method to estimate the degree of dealer market power from trading data and I apply it to the US municipal bond market using a new dataset containing all trades executed in this market. I find a high degree of dealer market power in this market, which reduces volumes traded by 65% to 70%. I use the model to evaluate investors' behavior under alternative policy interventions that could improve trading activity and the efficiency of the market. The introduction of weekly auctions where investors can trade directly with each other is the most effective, increasing volumes traded by roughly 60% and the allocation efficiency of the market by 80%.

Download or read book Essays on Search Frictions in Financial Markets written by Semih Uslu and published by . This book was released on 2016 with total page 186 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three chapters about search frictions in financial markets. Chapter 1: "Pricing and Liquidity in Decentralized Asset Markets" I develop a search-and-bargaining model of liquidity provision in over-the-counter markets where investors differ in their search intensities. A distinguishing characteristic of my model is its tractability: it allows for heterogeneity, unrestricted asset positions, and fully decentralized trade. I find that investors with higher search intensities (i.e., fast investors) are less averse to holding inventories and more attracted to cash earnings, which makes the model corroborate a number of stylized facts that do not emerge from existing models: (i) fast investors provide intermediation by charging a speed premium, and (ii) fast investors hold larger and more volatile inventories. I also calibrate the model, demonstrate that it produces realistic quantitative outcomes, and use it to study the effect of trading frictions on the supply and price of liquidity. The results have policy implications concerning the Volcker rule. Chapter 2: "Price Dispersion and Trading Activity during Turbulent Times" I construct a dynamic model of crises in a decentralized asset market that operates via search and bargaining. The crisis is modeled as a one-time aggregate shock to uncertainty with a random recovery. The arrival of the crisis shock leads to an increase in both the volatility of asset payoff and the volatility of investors' background risk. The equilibrium path for investors' valuations, terms of trade, and the distribution of investors' positions is characterized in closed form both during the crisis and during the recovery. Tractability of the model allows me to derive natural proxies for price dispersion and trading activity. I show that both volatility of asset payoff and volatility of background risk contribute to higher level of price dispersion during the crisis. Trading activity might be higher or lower depending on the increase in the volatility of background risk relative to the increase in the volatility of asset payoff, consistent with the "flight-to-quality" observations during extreme episodes. A flight to the asset market always starts with a "heating-up" in trading activity but a flight from the market might start with a dry-up or heating-up during the onset of the crisis. If the relative increase in the volatility of asset payoff is too high, a period of fire sales is triggered leading to a short heating-up before the complete dry-up of the trading activity. I calibrate the model according to the U.S. corporate bond market data and show that it captures the observations during the subprime crisis. Chapter 3: "Endogenous Liquidity and Cross-section of Returns in Dynamic Bargaining Markets" The empirical analysis of liquid/illiquid asset pairs reveals the existence of a return differential (liquidity premium) between those types of assets. The time variation in liquidity premia is delineated by the term "flight-to-liquidity," meaning that liquidity premia are higher during extreme market episodes. In this paper, I extend the search-and-bargaining model of Weill (2008) by allowing for risk aversion, to explain this observation. Risk-averse investors optimally allocate their limited budgets of search efforts to various assets. This extension allows me to examine the relationship between risk and liquidity of assets in the cross-section and over time. My model generates endogenous cross-sectional liquidity differentials corroborating much of the empirical evidence. Furthermore, I show that when asset payoffs are more volatile, trade surpluses are higher because idiosyncratic hedging quality differentials are wider. Higher trade surpluses lead to higher value of search, and in turn, higher opportunity cost of committing to a particular asset, especially to an illiquid one. Therefore, periods of high volatility are associated with a flight-to-liquidity.

Download or read book Care Homes in a Turbulent Era written by Komla Dzigbede and published by Edward Elgar Publishing. This book was released on 2023-08-14 with total page 459 pages. Available in PDF, EPUB and Kindle. Book excerpt: This scholarly Research Handbook captures key observations and analyses within the field of public financial management. It offers much-needed insights into possible future research ventures while presenting contemporary summaries of past studies in this ever-evolving field.

Download or read book The Human Network written by Matthew O. Jackson and published by Vintage. This book was released on 2020-02-04 with total page 354 pages. Available in PDF, EPUB and Kindle. Book excerpt: Here is a fresh, intriguing, and, above all, authoritative book about how our sometimes hidden positions in various social structures—our human networks—shape how we think and behave, and inform our very outlook on life. Inequality, social immobility, and political polarization are only a few crucial phenomena driven by the inevitability of social structures. Social structures determine who has power and influence, account for why people fail to assimilate basic facts, and enlarge our understanding of patterns of contagion—from the spread of disease to financial crises. Despite their primary role in shaping our lives, human networks are often overlooked when we try to account for our most important political and economic practices. Matthew O. Jackson brilliantly illuminates the complexity of the social networks in which we are—often unwittingly—positioned and aims to facilitate a deeper appreciation of why we are who we are. Ranging across disciplines—psychology, behavioral economics, sociology, and business—and rich with historical analogies and anecdotes, The Human Network provides a galvanizing account of what can drive success or failure in life.