Articles scientifiques

A Model of Trading in the Art Market

C. SPAENJERS, S. LOVO

American Economic Review

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Départements : Finance, GREGHEC (CNRS)

Mots clés : art; auctions; endogenous trading; price indexes; private values; returns

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2404339


We present an infinite-horizon model of endogenous trading in the art auction market. Agents make purchase and sale decisions based on the relative magnitude of their private use value in each period. Our model generates endogenous cross-sectional and time-series patterns in investment outcomes. Average returns and buy-in probabilities are negatively correlated with the time between purchase and resale (attempt). Idiosyncratic risk does not converge to zero as the holding period shrinks. Prices and auction volume increase during expansions. Our model finds empirical support in auction data and has implications for selection biases in observed prices and transaction-based price indexes

Belief-free price formation

S. LOVO, T. TOMALA, J. HÖRNER

Journal of Financial Economics

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Départements : Finance, GREGHEC (CNRS), Economie et Sciences de la décision


Can Innovation Help U.S. Manufacturing Firms Escape Import Competition from China?

J. HOMBERT, A. MATRAY

The Journal of Finance

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Départements : Finance, GREGHEC (CNRS)


We study whether R&D-intensive firms are more resilient to trade shocks. Wecorrect for the endogeneity of R&D using tax-induced changes to R&D cost. While rising imports from China lead to slower sales growth and lower profitability, these effects are significantly smaller for firms with a larger stock of R&D (by about half when moving from the bottom quartile to the top quartile of R&D). We provide evidence that this effect is explained R&D allowing firms to increase product differentiation. As a result, while firms in import-competing industries cut capital expenditures and employment, R&D-intensive firms downsize considerably less

CoMargin

J. A. CRUZ LOPEZ, J. HARRIS, C. HURLIN, C. PERIGNON

Journal of Financial and Quantitative Analysis

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Départements : Finance, GREGHEC (CNRS)

Mots clés : Collateral, Counterparty Risk, Derivatives Markets, Extreme Dependence

https://depts.washington.edu/jfqa/2016/02/25/comargin/


We present CoMargin, a new methodology to estimate collateral requirements in derivatives central counterparties (CCPs). CoMargin depends on both the tail risk of a given market participant and its interdependence with other participants. Our approach internalizes trading externalities and enhances the stability of CCPs, thus, reducing systemic risk concerns. We assess our methodology using proprietary data from the Canadian Derivatives Clearing Corporation that includes daily observations of the actual trading positions of all of its members from 2003 to 2011. We show that CoMargin outperforms existing margining systems by stabilizing the probability and minimizing the shortfall of simultaneous margin-exceeding losses

Data abundance and asset price informativeness

T. FOUCAULT, J. DUGAST

Journal of Financial Economics

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Départements : Finance, GREGHEC (CNRS)

Mots clés : Asset Price Informativeness, Big Data, FinTech, Information Processing, Markets for Information, Contrarian and momentum trading

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2398904


Information processing filters out the noise in data but it takes time. Hence, low precision signals are available before high precision signals. We analyze how this feature affects asset price informativeness when investors can acquire signals of increasing precision over time about the payoff of an asset. As the cost of low precision signals declines, prices are more likely to reflect these signals before more precise signals become available. This effect can ultimately reduce price informativeness because it reduces the demand for more precise signals (e.g., fundamental analysis). We make additional predictions for trade and price patterns


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