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Speculators can discover whether a signal is true or false by processing it but this takes time. Hence they face a trade-off between trading fast on a signal (i.e., before processing it), at the risk of trading on a false positive, or trading after processing the signal, at the risk that prices...
Persistent link: https://www.econbiz.de/10011147691
This paper applies the dichotomous theory of choice by Zou (2000a) tothe analysis of investmentstrategies and security markets. Issues concerning individualoptimality, (approximate) arbitrage,capital market equilibrium, and Pareto efficiency are studied undervarious market conditions. Among the...
Persistent link: https://www.econbiz.de/10011257579
Existing theories of the term structure of swap rates provide an analysis of the Treasury-swap spread based on either a liquidity convenience yield in the Treasury market, or default risk in the swap market. While these models do not focus on the relation between corporate yields and swap rates...
Persistent link: https://www.econbiz.de/10005011565
In this study we re-examine the pricing of equity and the risk incentives of shareholders in levered firms. We derive a down-and-out call equity valuation model which rests on the assumption that shareholders choose the optimal investment and asset returns' volatility as a function of current...
Persistent link: https://www.econbiz.de/10005021595
Aggregate art price patterns mask a lot of underlying variation — both in the time series and in the cross-section. The authors argue that, to increase our understanding of the market for aesthetics, it is helpful to take a micro perspective on the formation of art prices, and acknowledge that...
Persistent link: https://www.econbiz.de/10011147694
High frequency arbitrage opportunities arise when the price of one asset follows, with a lag, changes in the value of another related asset due to information arrival. These opportunities are toxic because they expose liquidity suppliers to the risk of being picked off by arbitrageurs. Hence,...
Persistent link: https://www.econbiz.de/10011147709
We propose a simple network–based methodology for ranking systemically important financial institutions. We view the risks of firms –including both the financial sector and the real economy– as a network with nodes representing the volatility shocks. The metric for the connections of the...
Persistent link: https://www.econbiz.de/10011255476
Most of the available monthly interest data series consist of monthlyaverages of daily observations. It is well-known that this averaging introduces spurious autocorrelation effectsin the first differences of the series. It isexactly this differenced series we are interested in when...
Persistent link: https://www.econbiz.de/10011255499
This paper investigates the importance of speed for technical trading rule performance for three highly liquid ETFs listed on NASDAQ over the period January 6, 2009 up to September 30, 2009. In addition we examine the characteristics of market activity over the day and within subperiods...
Persistent link: https://www.econbiz.de/10011255568
This discussion paper resulted in an article in the <I>Journal of Financial Econometrics</I> (2012). Vol. 10, pages 354-389.<p> This paper considers spot variance path estimation from datasets of intraday high frequency asset prices in the presence of diurnal variance patterns, jumps, leverage effects and...</p></i>
Persistent link: https://www.econbiz.de/10011255584