.png){kind=icon}
.png){kind=icon}
Return
Price pressures
.png){kind=icon}
PRE
AI
DOI：10.1016/j.jfineco.2014.08.001.png)
.png){kind=icon}
Original request for help.png){kind=icon}
Share.png){kind=icon}
Save
Abstract
En 中文
We study price pressures, i.e., deviations from the efficient price due to risk-averse intermediaries supplying liquidity to asynchronously arriving investors. Empirically, New York Stock Exchange intermediary data reveals economically large price pressures, 0.49% on average with a half life of 0.92 days. Theoretically, a simple dynamic inventory model captures an intermediary's use of price pressure to mean-revert inventory. She trades off revenue loss due to price pressure against price risk associated with staying in a nonzero inventory state. The closed-form solution identifies the intermediary's risk aversion and the investors' private value distribution from the observed time series patterns of prices and inventories. These parameters imply a relative social cost due to price pressure, a deviation from constrained Pareto efficiency, of approximately 10% of the cost of immediacy. (C) 2014 Elsevier B.V. All rights reserved.
Keywords:
Liquidity
Inventory risk
Intermediary
Volatility
AI Summary
Key information extracted from the uploaded paper, including a brief overview, abstract, background, key highlights, visual analysis, and future outlook.
Journal
IF:
12
Papers:
3.8K
Citations:
5.5W
