A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.
- Topic classification is ongoing.
- Please kindly let me know [mingze.gao@mq.edu.au] in case of any errors.
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Results 324 resources
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In an extension of the Kyle (1985) model of continuous insider trading, it is shown that asymmetric information can make it impossible to price options by arbitrage. Even when an option would appear to be redundant, its introduction into the market can cause the volatility of the underlying asset to become stochastic. This eliminates the potential for dynamically replicating the option. The change in the price process of the asset reflects a change in the information transmitted by volume and prices when the option is traded.
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We compare a sealed-bid uniform-price auction (the Treasury's experimental format) with a sealed bid discriminatory auction (the Treasury's format heretofore), assuming the good is perfectly divisible. We show that the auction theory that prompted the experiment, which assumes single-unit demands, does not adequately describe the bidding game for Treasury securities. Collusive strategies are self-enforcing in uniform-price divisible-good auctions. In these equilibria, the seller's expected revenue is lower than in equilibria of discriminatory auctions.
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We characterize a credit market equilibrium in which banks coexist with capital markets and firms obtain funding from both sources. An incentive problem exists between the firm's insiders and outside providers of capital. Banks can provide not only credit but also monitoring services. We show that when banks cannot precommit to a particular level of monitoring, there is a unique credit market equilibrium with firms being financed with a combination of bank credit and external capital. In this equilibrium, a marginal substitution of bank credit for capital market financing would raise the firm's stock price.
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We document a pattern in the serial dependence of security returns around nontrading days. The correlation of returns the second day after a weekend or holiday with returns the first day after is unusually low, and in many return series is negative, implying a reversal of price movements. We also document unusually large positive return autocorrelations the last day before and the first day after weekends and holidays. The pattern has existed in equity returns for over 100 years, and also exists in several futures markets, implying that the pattern is robust to alternative market microstructures.
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In Japan, almost identical government bonds can be trade at large price differentials. Motivated by this phenomenon, we examine the issue of the value of liquidity in markets for riskless securities. We develop a model of an issuer of bonds, a market maker, and heterogeneous investors trading in an incomplete market. We show not only that divergent prices for similar securities can be sustained in a rational expectations equilibrium, but also that this divergnece may be optimal from the perspective of the issuer. Price segmentation is possible because agents have a desire to trade, but shortsale restrictions limit their trading strategies and prevent them from forcing bond prices to be equal. Restricting the form of market making to exclude price competition and unregulated profit maximization is also necessary to sustain price segmentation. The optimality of segmentation from the issuer's standpoint arises because of the issuer's standpoint arises because of the issuer's ability to charge for the liquidity services provided to the investors.
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In this article we are concerned with the effect of the number of investment analysts following a firm on the speed of adjustment of the firm's stock price to new information that has common effects across firms. It is found that returns on portfolios of firms that are followed by many analysts tend to lead those of firms that are followed by fewer analysts, even when the firms are of approximately the same size. Many analyst firms also tend to respond more rapidly to market returns than do few analyst firms, adjusting for firm size. This relation, however, is nonlinear, and the marginal effect of the number of analysts on the speed of price adjustment increases with the number of analysts.
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- Bond (17)
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- Journal Article (324)