We study the profitability of traders in two fully electronic and highly liquid markets: the Dow and Standard & Poor's 500 e-mini futures markets. Using unique information that identify counterparties to a transaction, we show and seek to explain the fact that the network pattern of trades captures the relations between behavior in the market and returns. Our approach includes a simple representation of how much a shock is amplified by the network and how widely it is transmitted. This representation provides a possible shorthand for understanding the consequences of a fat-finger trade, a withdrawing of liquidity, or other market shock. (C) 2014 Elsevier B.V. All rights reserved.
Trading networks and liquidity provision / Patacchini, Eleonora; Ethan Cohen, Cole; Andrei, Kirilenko. - In: JOURNAL OF FINANCIAL ECONOMICS. - ISSN 0304-405X. - STAMPA. - 113:2(2014), pp. 235-251. [10.1016/j.jfineco.2014.04.007]
Trading networks and liquidity provision
PATACCHINI, Eleonora;
2014
Abstract
We study the profitability of traders in two fully electronic and highly liquid markets: the Dow and Standard & Poor's 500 e-mini futures markets. Using unique information that identify counterparties to a transaction, we show and seek to explain the fact that the network pattern of trades captures the relations between behavior in the market and returns. Our approach includes a simple representation of how much a shock is amplified by the network and how widely it is transmitted. This representation provides a possible shorthand for understanding the consequences of a fat-finger trade, a withdrawing of liquidity, or other market shock. (C) 2014 Elsevier B.V. All rights reserved.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
