Clients' Connections: Measuring the Role of Private Information in Decentralized Markets

• 成果类型: Article
• 署名作者: Kondor, Peter; Pinter, Gabor
• 署名单位: University of London; London School Economics & Political Science; Centre for Economic Policy Research - UK; Bank of England
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13087
• 发表日期: 2022
• 页码: 505-544
• 关键词: US TREASURY MARKET; Order Flow; Price discovery; trading volume; economic-news; liquidity; IMPACT; RISK; ask

摘要

We propose a new measure of private information in decentralized markets-connections-which exploits the time variation in the number of dealers with whom a client trades in a time period. Using trade-level data for the U.K. government bond market, we show that clients perform better when having more connections as their trades predict future price movements. Time variation in market-wide connections also helps explain yield dynamics. Given our novel measure, we present two applications suggesting that (i) dealers pass on information, acquired from their informed clients, to their affiliates, and (ii) informed clients better predict the orderflow intermediated by their dealers.