Bergman, Kadan, Michaely, and Moulton
Discussion by Marius Zoican
Main findings
Source: Jovanovic and Menkveld (2020)
we show that the illiquidity of stressed bonds has increased after the Volcker Rule. Dealers regulated by the rule have curtailed their market-making activities and non-Volcker-affected dealers have not offset the decreased activities of Volcker-affected dealers.
(I would like to see more on the implications)
Price decomposition | Order book data |
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Kalman filter: decompose price in permanent (martingale ) and transitory component (AR process : |
Build an intra-day measure of order book imbalance (e.g., top 5 levels) |
Do prop traders trade against the sign of ? | Do prop traders buy when there is sell (buy) pressure at the ask (bid)? |
Intermediary Capital Risk Factor and Liquidity
Results on negative returns
Is prop trading activity relatively stable over time?
If yes, wouldn't lagged stock liquidity/volatility be endogenous to prop trader presence? (25% of trading for most stocks)