Price Discovery in the U.S. Treasury Market: The Impact of Orderflow and Liquidity on the Yield Curve

We examine the role of price discovery in the U.S. Treasury market through the empirical relationship between orderflow, liquidity, and the yield curve. We find that orderflow imbalances (excess buying or selling pressure) can account for as much as 26 percent of the day-to-day variation in yields on days without major macroeconomic announcements. The effect of orderflow on yields is permanent and strongest when liquidity is low. All of the evidence points toward an important role of price discovery on understanding the behavior of the yield curve.

Flight-to-Quality or Flight-to-Liquidity? Evidence From the Euro-Area Bond Market

Do bond investors demand credit quality or liquidity? The answer is both, but at different times and for different reasons. Using data on the Euro-area government bond market, which features a unique negative correlation between credit quality and liquidity across countries, we show that the bulk of sovereign yield spreads is explained by differences in credit quality, though liquidity plays a non-trivial role especially for low credit risk countries and during times of heightened market uncertainty. In contrast, the destination of large flows into the bond market is determined almost exclusively by liquidity. We conclude that credit quality matters for bond valuation but that, in times of market stress, investors chase liquidity, not credit quality.

Midwestern Artists\u27 Responses to the Demands of Entrepreneurial Management

Artists have the potential to achieve higher levels of success in business management, leadership roles, and entrepreneurial endeavors if equipped with the proper knowledge. Although artists may have a creative perspective and could possess many of the attributes sought after by organizations and communities in need of innovative leaders, their approaches to entrepreneurial management differ from traditional business managers or community leaders. The problem was poor understanding of how artists in Midwestern regions of the United States respond to the demands of entrepreneurial management. The purpose of this qualitative multiple-case study was to understand how 20 individuals who self-identified as artists and living or working in a specific county located in the Midwestern United States responded to entrepreneurial management demands. The key research question involved how these self-identified artists perceived and dealt with the demands of entrepreneurship through the lens of aesthetic leadership. Data from interviews, field notes, and observations were coded and categorized using NVivo to assist in identifying patterns and themes. Findings indicated that the self-identified artists indicated a need for entrepreneurial support, educational systems, and business development support from state and local community service programs that recognize and support their creative entrepreneurial endeavors. Understanding the intrinsic motivations that influence artists can help educators and contribute to business development that incorporates their unique circumstances. Art is transformational on many levels and benefits individuals, communities, organizations, and societies by promoting a more humanistic vision of the world

Packaging Liquidity: Blind Auctions and Transaction Efficiencies

The costs of implementing investment strategies represent a significant drag on the performance of mutual funds and other institutional investors. It is the responsibility of institutional investors, and in the interests of the individual investors they represent, to seek market mechanisms that mitigate trading costs. We investigate an example of one such liquidity provision mechanism whereby liquidity demanders auction a set of trades as a package directly to potential liquidity providers. A critical feature of the auction is that the identities of the securities in the package are not revealed to the bidder. We demonstrate that this mechanism provides a transactions cost savings relative to more traditional trading mechanisms for the liquidity demander as well as an efficient way for liquidity suppliers to obtain order flow. We argue that the cost savings afforded this new mechanism are due to the potential for low cost crosses with the bidder\u27s existing inventory positions and through the longer trading horizon, and superior trading ability, of the bidders. This research suggests that the ability to innovate via new liquidity provision mechanisms can provide market participants with transaction cost savings that cannot be easily duplicated on more traditional exchanges

Effect of gender composition of committees

Does having more women on a committee matter? Interestingly, answers to this question are unknown, despite a significant push toward greater gender diversity on committees and boards. This article uncovers the mechanism of if and how committees’ gender diversity impacts its deliberations and decisions. We utilize a unique dataset that matches detailed meeting transcripts of the Federal Reserve’s Federal Open Market Committee (FOMC) spanning over 30 years, with member characteristics and economy-wide conditions, allowing us to effectively compare committees with the same member resources and economy-wide conditions but different gender diversity. We find that deliberations are more thorough and engaged in more gender-balanced committees, wherein both men and women talk more about wider topics in depth. Unlike findings from other studies, women in the FOMC participate as active members, whereby they are more likely to voice formal disagreement and less likely to be dismissed by an interruption. Finally, we find that member resources and the economy-wide conditions explain the committee’s decision, where gender diversity exhibits no explanatory power by and in itself. With the high correlation between gender diversity and member resources, we demonstrate that gender composition affects committees via two channels; deliberation qualities and member resources.publishedVersio

On the Formation and Structure of International Exchanges

We investigate the formation and structure of 248 financial exchanges throughout the world. First, we empirically analyze the determinants of exchange formation as well as the impact of exchange formation on the domestic country's economy. Second, conditional on formation, we use a probit model to relate the choice of trading mechanism to the characteristics of the economic environment in which the exchange exists. We find that the main determinants of exchange formation in a country are the degree of economic freedom, the growth of the economy, the availability of technology, and the legal system. In addition, we find that the impact of exchange formation on the macro economy is limited to a reduction in the growth of the monetary aggregates with no significant impact on productivity. Lastly, our results show that the choice of trading mechanism depends on the country's economic development, the degree of competition, and the extent of economic freedom

What Does Equity Sector Orderflow Tell Us about the Economy?

Investors rebalance their portfolios as their views about expected returns and risk change. We use empirical measures of portfolio rebalancing to back out investors’ views, specifically their views about the state of the economy. We show that aggregate portfolio rebalancing across equity sectors is consistent with sector rotation, an investment strategy that exploits perceived differences in the relative performance of sectors at different stages of the business cycle. The empirical foot-print of sector rotation has predictive power for the evolution of the economy and future bond market returns, even after controlling for relative sector returns. Contrary to many theories of price formation, trading activity therefore contains information that is not entirely revealed by resulting relative price changes.

Mutual fund performance: Using bespoke benchmarks to disentangle mandates, constraints and skill

This is the author accepted manuscript. the final version is available from Elsevier via the DOI in this recordWhile no two mutual funds are alike in terms of their mandates and constraints, metrics used to evaluate fund performance relative to peers typically fail to account for these differences by relying on generic benchmark indices and rankings. We develop a methodology to construct a conditional multi-factor benchmark that explicitly incorporates the details of a given fund’s mandates and constraints. The results suggest that (i) mandates and constraints are economically important and affect funds differently, (ii) in general, the average mutual fund has a much improved track record when comparing themselves to a bespoke benchmark, and (iii) the rank ordering of fund bespoke performance relative peers is significantly different than the original rank ordering suggesting advisors and board of directors would make better decisions regarding compensation and performance assessment respectively, if they incorporate the impact of mandates and constraints.Inquire Europ