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on Market Microstructure |
| By: | Francesc Dilmé (University of Bonn) |
| Abstract: | This paper studies trade in endogenously evolving markets exhibiting few traders at any given point in time. Traders arrive in the market and bargain until they complete a trade. We find that, unlike large markets, small markets feature trade delay and price dispersion, even when sellers and buyers are homogeneous and matching frictions are small. We characterize transaction prices as a function of the endogenous evolution of the market composition and economic conditions, providing several novel comparative statics results. Our analysis highlights the need to incorporate sub-market structures into the theoretical study of job, real estate, and rental markets, where trade opportunities are typically constrained by both the geographical location and individual characteristics of each trader. |
| Keywords: | Small dynamic markets, decentralized bargaining, trade delay. |
| JEL: | C73 C78 D53 G12 |
| Date: | 2022–08 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:193&r= |
| By: | Doruk Cetemen; Gonzalo Cisternas; Aaron Kolb; S Viswanathan |
| Abstract: | Two activists with correlated private positions in a firm’s stock, trade sequentially before simultaneously exerting effort that determines the firm’s value. We document the existence of a novel linear equilibrium in which an activist’s trades have positive sensitivity to her block size, but such orders are not zero on average: the leader activist manipulates the price to induce the follower to acquire a larger position and thus add more value. We examine the implications of this equilibrium for market outcomes and discuss its connection with the prominent phenomenon of “wolf-pack” activism—multiple hedge funds engaging in parallel with a target firm. We also explore the possibility of other equilibria where the activists trade against their initial positions. |
| Keywords: | activism; insider trading; noisy signaling; price manipulation; hedge funds |
| JEL: | D82 G14 G23 |
| Date: | 2022–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:94740&r= |