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We investigate the dynamics of prices, information and expectations in a competitive, noisy, dynamic asset pricing equilibrium model. We look at the bias of prices as estimators of fundamental value in relation to traders' average expectations and note that prices are more (less) biased than average expectations if and only if traders over-(under-) rely on(More)
In this paper we propose a tick time model for dealer quote interactions using ultra-high-frequency data. We include duration functions to measure the time dependence of volatility as well as information. In order to asses price discovery we define several measures in tick time. These measures can be aggregated to calender time and we define a comparative(More)
It is a well known fact that at high sampling frequencies, the contamination of microstructure noise causes the Realized Variance to be a biased measure of the Integrated Variance. Recent developments in this field propose sampling on lower frequencies, sub-sampling techniques, or bias corrections using the autocorrelation patterns in the data. In this(More)
The current paper proposes a conditional volatility model with time varying coefficients based on a multinomial switching mechanism. By giving more weight to either the persistence or shock term in a GARCH model, conditional on their relative ability to forecast a benchmark volatility measure, the switching reinforces the persistent nature of the GARCH(More)
This paper considers nonlinear dynamics of quotes issued by Nasdaq dealers. We study the top two ECN's (Island and Instinet) and the three most active market makers for a sample of twenty stocks traded at Nasdaq. We develop a model that extends the standard linear vector error correction model for price discovery in three different ways. First, quote(More)
We study the intraday dynamics of the VIX and VXF for the period January 2, 2008 to December 31, 2012. Applying a Vector Autoregression (VAR) model on daily data, we observe some evidence of causality from the VXF to the VIX. However, estimating a VAR using our ultra-high frequency data, we find strong evidence for bi-directional Granger causality between(More)
This paper examines the relation between the choice of the destination market for cross-listing and the home bias of investors. We use two measures of home bias, the domestic bias (the degree of overinvestment in the home market), and the foreign bias (the degree of over-/under-investment in a foreign market). First, we find a strong relation between the(More)
This paper develops a model that captures part of the price discovery process in a multiple dealer market through the quote setting behavior of different market participants. We extend the traditional linear models to a nonlinear VAR with a structural interpretation of the errors. Dealer efficiency is discussed in terms of impulse response functions. In our(More)
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