Wednesday, May 12, 2021 - 17:00 in ZOOM - Video Conference
Large Orders in Small Markets: The Value of Order Flow Predictability
A talk in the Bielefeld Stochastic Afternoon - Math Finance Session series by
Agostino Capponi from Columbia University
| Abstract: |
Institutional investors slice and dice large orders to minimize price impact. They use VWAP algorithms that trade at constant intensity for the duration of the order. Empirically, this (constant) intensity is higher for shorter orders. Observing intensity therefore makes duration predictable. This is puzzling, because investors say they prefer to trade under the radar. We rationalize the empirical findings by showing how, in theory, order predictability can benefit large orders. We further find that the presence of a large order benefits market makers unambiguously, but benefits other (small) investors only if the order trades at high enough intensity. (joint work with Albert Menkveld and Hongzhong Zhang).
Zoom Meeting ID: 97356243711
Passcode: 967348
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