Government Intervention and Arbitrage

• 成果类型: Article
• 署名作者: Pasquariello, Paolo
• 署名单位: University of Michigan System; University of Michigan
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhx074
• 发表日期: 2018
• 页码: 3344
• 关键词: central bank intervention; FOREIGN-EXCHANGE MARKET; time price discovery; cross-section; imperfect competition; OFFICIAL INTERVENTION; Investor sentiment; Order Flow; STOCK; liquidity

摘要

Direct government intervention in a market may induce violations of the law of one price in other, arbitrage-related markets. I show that a government pursuing a nonpublic, partially informative price target in a model of strategic market-order trading and segmented dealership generates equilibrium price differentials among fundamentally identical assets by clouding dealers' inference about the targeted asset's payoff from its order flow, to an extent complexly dependent on existing price formation. I find supportive evidence using a sample of American Depositary Receipts and other cross-listings traded in the major U.S. exchanges, along with currency interventions by developed and emerging countries between 1980 and 2009.