AFA2019会议论文（18）：Financial Institutions

AFA2019会议论文（18）：Financial Institutions

金融经济学 金融经济学 6天前

The Sound of Many Funds Rebalancing

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The Dark Side of Liquid Bonds in Fire Sale

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Alpha Decay

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1、The Sound of Many Funds Rebalancing

Alexander Chinco,University of Illinois

Vyacheslav (Slava) Fos,Boston College

Abstract

This paper proposes that complexity generates noise in financial markets.A stock's demand might appear random, not because individual investors are behaving randomly, but because it’s too computationally complex to predict how a wide variety of simple, deterministic, trading rules will interact with one another—even if you yourself are fully rational. There are two parts to our analysis. First, we illustrate how complexity can generate noise by modeling a particular kind of trading-rule interaction: index-fund rebalancing cascades. An initial shock to stock A causes an index fund to buy stock A and sell stock B,which then causes a second fund following a different benchmark to sell stock B and buy stock C,which then causes a third fund following yet another benchmark to. . . Although it’s easy to predict if this index-fund rebalancing cascade will eventually affect the demand for an unrelated stock Z,predicting how stock Z will be affected (buy? or sell?) is computationally intractable. Second, we give empirical evidence that complexity actually does generate noise in real-world financial markets by analyzing the end-of-day holdings of exchange-traded funds (ETFs).We show that ETF rebalancing cascades transmit economically large demand shocks,which are also statistically unpredictable.And,we document market participants behaving as if these demand shocks are noise.

原文链接：

https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFA2019&paper_id=320

2、The Dark Side of Liquid Bonds in Fire Sale

Maria Chaderina,Vienna University of Economics and Business

Alexander Muermann,Vienna University of Economics and Business

Christoph Scheuch,Vienna Graduate School of Finance

Abstract

We investigate which bonds institutional investors sell in fire sales. We find that these are mostly bonds that were trading in liquid markets before the fire sale,and that they are sold by other institutions as well. Somewhat surprisingly, the price impacts in these markets are higher than in bonds that were trading in less liquid markets before the fire sale, but are also liquidated during fire sales. It appears as if liquid bonds in fire-sales exhibit larger price impacts than less liquid bonds. We argue this is because institutions fail to fully account for the effect of selling common bonds on other market participants. Controlling for commonality of bonds, we find that liquid bonds have smaller price impacts in fire sales. This result matters for the measurement of systemic risk: the commonality of liquid bonds exacerbates fire sales losses, as they are sold more in fire sales. Measures of portfolio similarity should thus overweight liquid bonds overlap, not underweight it.

原文链接：

https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFA2019&paper_id=1112

3、Alpha Decay 

Rick Di Mascio,Inalytics Ltd.

Anton Lines,Columbia University

Narayan Y Naik,London Business School

Abstract

Using a novel sample of professional asset managers, we document positive incremental alpha on newly purchased stocks that decays over twelve months. While managers are successful forecasters at these short-to-medium horizons, their average holding period is substantially longer (2.2 years). Both slow alpha decay and the horizon mismatch can be explained by strategic trading behavior. Managers accumulate positions gradually and unwind gradually once the alpha has run out;they trade more aggressively when the number of competitors and/or correlation among information signals is high, and do not increase trade size after unexpected capital flows. Alphas are lower when competition/correlation increases.

原文链接：

https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFA2019&paper_id=1950

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