Essays in Financial Economics
| dc.contributor.advisor | Kyle, Albert S | en_US |
| dc.contributor.author | Zhou, Wei | en_US |
| dc.contributor.department | Business and Management: Finance | en_US |
| dc.contributor.publisher | Digital Repository at the University of Maryland | en_US |
| dc.contributor.publisher | University of Maryland (College Park, Md.) | en_US |
| dc.date.accessioned | 2022-09-16T05:32:55Z | |
| dc.date.available | 2022-09-16T05:32:55Z | |
| dc.date.issued | 2022 | en_US |
| dc.description.abstract | This dissertation contains two essays in market microstructure and institutional asset management. The first essay studies a dynamic model of strategic trading where the parameters of temporary price impact (how price depends on a trader's current rate of trading) and permanent price impact (how price depends on the cumulative quantity traded over time) are endogenous and time-varying. A monopolistic informed speculator trades with oligopolistic uninformed speculators. They agree to disagree about the precision of the informed speculator's private Gaussian information flow. In the interval-trading Nash equilibrium with linear Markov strategies, trade starts if the disagreement is high enough and stops when the decaying alpha becomes insufficient to generate further trading benefits. Equilibrium permanent price impact parameters encapsulate the counteracting effects of descending residual uncertainty and diminishing trading opportunities. Equilibrium temporary price impact parameters capture traders' inter-temporal trade-offs between the benefits of learning and trading. The second essay was motivated by the observation that active institutional investors anticipate potential unwinding costs when accumulating positions. In this essay, I develop a dynamic model to study how strategic traders' accumulation and unwinding motives interact and evolve when facing a decaying profit opportunity. The unwinding pressures come from quadratic (regulatory) holding costs and price impacts of competitors' trades. The model shows that (i) with unwinding pressures, traders are reluctant to exploit persistent opportunities and profit most from those with an intermediate decaying rate; (ii) competition alleviates the unwinding pressure from holding costs but strengthens that from competitors' price impacts; and (iii) with increased regulatory costs, traders' most profitable opportunities shift to more transient ones. | en_US |
| dc.identifier | https://doi.org/10.13016/3gqt-tmeh | |
| dc.identifier.uri | http://hdl.handle.net/1903/29139 | |
| dc.language.iso | en | en_US |
| dc.subject.pqcontrolled | Finance | en_US |
| dc.subject.pquncontrolled | institutional asset management | en_US |
| dc.subject.pquncontrolled | market liquidity | en_US |
| dc.subject.pquncontrolled | price impact | en_US |
| dc.subject.pquncontrolled | strategic trading | en_US |
| dc.title | Essays in Financial Economics | en_US |
| dc.type | Dissertation | en_US |
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