Price pressures

• 成果类型: Article
• 署名作者: Hendershott, Terrence; Menkveld, Albert J.
• 署名单位: University of California System; University of California Berkeley; Vrije Universiteit Amsterdam; Tinbergen Institute
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2014.08.001
• 发表日期: 2014
• 页码: 405-423
• 关键词: liquidity; Inventory risk; Intermediary; volatility

摘要

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.