How does the Introduction of an ETF Market with Liquidity Providers Impact the Liquidity of the Underlying Stocks?.

This article examines how the inception of an ETF market impacts several dimensions of the liquidity of the ETF-underlying-index stocks. In contrast with previous research, our evidence is based on an ETF market where liquidity providers (LPs) act as market makers. We find that: (1) the market for the underlying stocks becomes more liquid after the ETF ntroduction for investors who trade at the best-limit quotes; (2) but the stock market becomes ess deep for larger traders, most probably because some large liquidity traders exit the underlying stocks’ market for the ETF market. Some statistics suggest that those results could be related to the trading activity of ETF LPs.Transaction Costs; Exchange-Traded Fund (ETF); Index Trading;

Linear bonds valuation with interest rate models : does it work?

This paper compares the implications of different interest rate models for valuing the so-called OLOs (Belgian coupons bonds). The prices of these bonds implied by some well-known one-factor models are compared to the actual prices observed on the market. Our finding suggest that these interest rate models are unsatisfactory, especially in valuing longer term bonds.

Le marché des marchés boursiers: mécanismes d'échange et défis concurrentiels

This paper focuses on the competitiveness challenge that every stock exchange now faces. In or-der to improve its quality, a stock exchange will try to make its trading system more attractive for inves-tors. For a few years, order-driven markets seem to win this competitive struggle.Cet article est consacré aux défis concurrentiels auxquels sont désormais confrontées les bourses traditionnelles. Pour améliorer sa compétitivité, une bourse va notamment tenter, via le choix d'un mé-canisme d'échange adapté, d'offrir à ses clients un service de qualité à un coût très raisonnable. Depuis quelques années, la lutte concurrentielle semble tourner à l'avantage des marchés dirigés par les ordres

Structure des taux d'intérêt et processus de diffusion : une comparaison empirique par inférence indirecte

dissertn: Diss. Doct

Measuring the disposition effect

Despite hundreds of papers confirming the existence of the disposition effect, too little attention has been devoted to the prevailing arguments on the choice of a given method to measure it. This paper fills this gap and compares different measurement approaches. First, based on empirical and simulationbased data, I show how results may differ across measures depending on market trends but, more importantly, on the frequency at which investors make their decisions. Second, the pitfalls in analyzing cross-sectional differences in the disposition effect are illustrated and discussed. Finally, I clearly show that hazard models are quite appropriate to measuring the disposition effect of any investor, be it a day trader or a typical retail investor who monitors his portfolio infrequently

Competition between Exchanges: Euronext versus Xetra

Panel discussion on competition, clearing and settlement with Frank Lierman (BNB), Patrick Van Cayseele (KULeuven), Paul Bodart (Bank of New York), Erik Theissen (Bonn University) and Rudy De Winne (FUCaM). Based on Professor Theissen's paper, a discussion on the quality of Euronext and Xetra markets

Processus de diffusion et biais de discrétisation : une analyse empirique par inférence indirecte

Cet article a pour objet la comparaison de divers processus de diffusion de taux d'intérêt à court terme dans un cadre européen. L'estimation par la méthode du maximum de vraisemblance des paramètres des versions discrètes approchées de ces processus nous conduit à accorder la préférence à des processus simples et classiques tels que le processus d'Ornstein-Uhlenbeck de Vasicek (1977) ou le processus "Racine Carrée" de Cox, Ingersoll & Ross (1985). Nous nous focalisons ensuite sur le biais de discrétisation et nous proposons de corriger ce biais par le recours à la méthode d'inférence indirecte. La confrontation des résultats obtenus à partir des deux méthodologies confirme l'existence de ce biais de discrétisation et l'aptitude de la méthode d'inférence indirecte à corriger celui-ci. Finalement, nous montrons que cette méthodologie est applicable dans le cadre de l'estimation des paramètres de deux processus de diffusion corrélés

Measuring the disposition effect

Despite hundreds of papers confirming the existence of the disposition effect, too little attention has been devoted to the prevailing arguments on the choice of a given method to measure it. This paper falls this gap and compares different measurement approaches. First, based on empirical and simulation-based data, I show how results may differ across measures depending on market trends but, more importantly, on the frequency at which investors make their decisions. Second, the pitfalls in analyzing cross-sectional differences in the disposition effect are illustrated and discussed. Finally, I clearly show that hazard models are quite appropriate to measuring the disposition effect of any investor, be it a day trader or a typical retail investor who monitors his portfolio infrequently

The Discretization Bias for Processes of the Short-Term Interest Rate : An Empirical Analysis

This paper compares difference continuous-time specifications for the short-term interest rate dynamics on five European markets. We propose a general specification which encompasses nine well-known processes of the financial literature. A classical estimation of the parameters leads us to the choice of simple models like the Ornstein-Uhlenbeck process of Vasicek (1977) or the “Square Root” process of Cox, Ingersoll and Ross (1985). Then we focus on the discretization bias and a methodology to correct it is proposed. The results confirm the existence of a discretization bias. Finally, we show that this simulation-based methodology can be applied to the estimation of the parameters of correlated diffusion processes.