Trade-throughs in European cross-traded equities after transaction costs – empirical evidence for the EURO STOXX 50

This paper investigates the accuracy and heterogeneity of output growth and inflation forecasts during the current and the four preceding NBER-dated U.S. recessions. We generate forecasts from six different models of the U.S. economy and compare them to professional forecasts from the Federal Reserve’s Greenbook and the Survey of Professional Forecasters (SPF). The model parameters and model forecasts are derived from historical data vintages so as to ensure comparability to historical forecasts by professionals. The mean model forecast comes surprisingly close to the mean SPF and Greenbook forecasts in terms of accuracy even though the models only make use of a small number of data series. Model forecasts compare particularly well to professional forecasts at a horizon of three to four quarters and during recoveries. The extent of forecast heterogeneity is similar for model and professional forecasts but varies substantially over time. Thus, forecast heterogeneity constitutes a potentially important source of economic fluctuations. While the particular reasons for diversity in professional forecasts are not observable, the diversity in model forecasts can be traced to different modeling assumptions, information sets and parameter estimates. JEL Classification: G14, G15, G2

LIQUIDITY IN TIMES OF COMPETITION – EVIDENCE FROM THE EUROPEAN STOCK MARKET

With the Markets in Financial Instruments Directive in effect since November 2007, new trading venues have emerged in European equities trading, among them Chi-X. This paper analyzes the impact of this new market entrant on the home market as well as on consolidated liquidity of French blue chip equities, newly tradable on Chi-X. Our findings suggest that owing to this new competition the home market’s liquidity has enhanced. This is apparently due to the battle for order flow which results in narrower spreads and increased market depth. Given these results, overall liquidity in a consolidated order book is in the French case higher than without the new competitor

Competition among electronic markets and market quality

WITH THE MARKETS IN FINANCIAL INSTRUMENTS DIRECTIVE (MIFID) IN EFFECT, NEW ELECTRONIC MARKETS EMERGED IN EUROPEAN EQUITIES TRADING. WE ADDRESS THE IMPACT OF MARKET FRAGMENTATION ON STOCK LIQUIDITY BY EXAMINING SAMPLES OF EUROPEAN BLUE CHIP STOCKS BEFORE AND AFTER THE INTRODUCTION OF MIFID

Flexible volume weighted average price executions

CONCEPTUAL DEVELOPMENT OF A DARK POOL TRADING MODEL THAT INTENDS TO BALANCE MARKET IMPACT COSTS AND FLEXIBILITY IN SECURITIES TRADING

Smart Order Routing technology in the new European equity trading landscape, Working paper, Chair of E-Finance

Abstract. In Europe, fragmentation of execution venues has been triggered by increasing competition among markets and a new regulatory environment set up by MiFID. Against this background, IT-based sophisticated order routing systems (Smart Order Routing systems) promise to assure efficiency despite fragmented markets. This raises the question on the relevance and economic value of this technology in European equity trading. Based on order book data for EURO STOXX 50 securities of ten European electronic execution venues, this paper assesses the potential of Smart Order Routing technology by measuring the performance of actual executions in European order book trading relative to a Smart Order Router implementation that detects and accesses best European prices. We identify 6.71% full trade troughs and 6.45% partial tradethroughs in our dataset enabling for significant absolute and relative savings. This indicates that Smart Order Routing technology can provide business value by improving order executions in European cross-tradable equities