Related papers: Outsider Trading
In this paper we investigate the endogenous information contained in four liquidity variables at a five minutes time scale on equity markets around the world: the traded volume, the bid-ask spread, the volatility and the volume at first…
We study a dynamic portfolio optimization problem related to convergence trading, which is an investment strategy that exploits temporary mispricing by simultaneously buying relatively underpriced assets and selling short relatively…
This paper examines when the public provision of information in search markets improves welfare. I consider a two-sided frictional search market in which buyers match with vertically differentiated sellers. The market is segmented into…
Financial markets are subject to long periods of polarized behavior, such as bull-market or bear-market phases, in which the vast majority of market participants seem to almost exclusively choose one action (between buying or selling) over…
Theory purports that animal foraging choices evolve to maximize returns, such as net energy intake. Empirical research in both human and nonhuman animals reveals that individuals often attend to the foraging choices of their competitors…
Does a high dispersal rate provide a competitive advantage when risking competitive exclusion? To this day, the theoretical literature cannot answer this question in full generality. The present paper focuses on the simplest mathematical…
Cap-based regulations are widely used to address distributional disparities in matching markets, but their efficiency relative to alternative instruments such as subsidies remains poorly understood. This paper develops a framework for…
The design of data markets has gained importance as firms increasingly use machine learning models fueled by externally acquired training data. A key consideration is the externalities firms face when data, though inherently freely…
We study historical dynamics of joint equilibrium distribution of stock returns in the U.S. stock market using the Boltzmann distribution model being parametrized by external fields and pairwise couplings. Within Boltzmann learning…
This paper studies the impact of imperfect information in online control with adversarial disturbances. In particular, we consider both delayed state feedback and inexact predictions of future disturbances. We introduce a greedy, myopic…
A self-organized model with social percolation process is proposed to describe the propagations of information for different trading ways across a social system and the automatic formation of various groups within market traders. Based on…
We show that under mild assumptions, the total value of information to informed traders in the market can be measured by the covariance between price changes and order flow. This covariance captures noise trader losses, which equal informed…
We revisit the problem of predicting directional movements of stock prices based on news articles: here our algorithm uses daily articles from The Wall Street Journal to predict the closing stock prices on the same day. We propose a unified…
We propose a method to infer lead-lag networks of traders from the observation of their trade record as well as to reconstruct their state of supply and demand when they do not trade. The method relies on the Kinetic Ising model to describe…
Increased data gathering capacity, together with the spread of data analytics techniques, has prompted an unprecedented concentration of information related to the individuals' preferences in the hands of a few gatekeepers. In the present…
We study the problem of designing a two-sided market (double auction) to maximize the gains from trade (social welfare) under the constraints of (dominant-strategy) incentive compatibility and budget-balance. Our goal is to do so for an…
In this paper we extend the theory of option pricing to take into account and explain the empirical evidence for asset prices such as non-Gaussian returns, long-range dependence, volatility clustering, non-Gaussian copula dependence, as…
This paper shows that Hamiltonians and operators can also be put to good use even in contexts which are not purely physics based. Consider the world of finance. The work presented here {models a two traders system with information exchange…
I characterize the consumer-optimal market segmentation in competitive markets where multiple firms selling differentiated products to consumers with unit demand. This segmentation is public---in that each firm observes the same market…
Neural networks are often utilised in critical domain applications (e.g. self-driving cars, financial markets, and aerospace engineering), even though they exhibit overconfident predictions for ambiguous inputs. This deficiency demonstrates…