Year: 2021
Type: article
Abstract: ABSTRACT We propose a new measure of private information in decentralized markets—connections—which exploits the time variation in the number of dealers with whom a client trades in a time period. Using trade‐level data for the U.K. government bond market, we show that clients perform better when having more connections as their trades predict future price movements. Time variation in market‐wide connections also helps explain yield dynamics. Given our novel measure, we present two applications suggesting that (i) dealers pass on information, acquired from their informed clients, to their affiliates, and (ii) informed clients better predict the orderflow intermediated by their dealers.
Source: The Journal of Finance
DOI: 10.1111/jofi.13087
Authors: PÉTER KONDOR, GÁBOR PINTÉR
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3131600200