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PublicationBrokers and Order Flow Leakage: Evidence from Fire Sales(Wiley, 2019-11-14)
Scopus© Citations 23 -
PublicationQuantitative Easing and Equity Prices: Evidence from the ETF Program of the Bank of Japan(Oxford Univ. Press, 2019-12)Since the introduction of its Quantitative and Qualitative Easing program in 2013, the Bank of Japan has been increasing its holdings of Japanese equity through large scale purchases of index-linked ETFs, to lower risk premia. We exploit the cross-sectional heterogeneity of the supply shock to identify a positive and persistent impact on stock prices, consistent with a portfolio balance channel. The evidence suggests that long-run demand curves for stocks are downward sloping with unitary price elasticity. We show that the purchases of ETFs tracking the price-weighted Nikkei 225 generate pricing distortions relative to a value-weighted benchmark.
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PublicationOn the Quality of Cryptocurrency Markets: Centralized Versus Decentralized Exchanges( 2023-07-18)We compare the market quality of centralized crypto exchanges (CEXs) such as Binance and Kraken to decentralized blockchain-based venues (DEXs) such as Uniswap v2 and v3. After discussing the microstructure of such exchanges, we analyze two key aspects of market quality: transaction costs and deviations from the no-arbitrage condition. We find that CEXs and DEXs operate on roughly equal footing in terms of transaction costs, particularly in light of recent innovations in DEX protocols. Moreover, while CEXs provide superior price efficiency, DEXs eliminate custodian risk. These complementary advantages may explain why both market structures coexist.
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PublicationNon-Standard Errors(Journal of Finance, 2023-03-29)In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in sample estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation acrossresearchers adds uncertainty: non-standard errors. To study them, we let 164 teams test six hypotheses on the same sample. We find that non-standard errors are sizeable, on par with standard errors. Their size (i) co-varies only weakly with team merits, reproducibility, or peer rating, (ii) declines significantly after peer-feedback, and (iii) is underestimated by participants.
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PublicationOn The Quality Of Cryptocurrency Markets: Centralized Versus Decentralized Exchanges( 2022-09-03)We compare decentralized blockchain-based venues (DEXs) to centralized crypto exchanges (CEXs) by assessing two key aspects of market quality: market liquidity and price efficiency. A comprehensive analysis of transaction costs and deviations from the "triangular" no-arbitrage condition suggests that market liquidity in CEXs and DEXs is similar but DEX prices are less efficient. While the main frictions for DEXs are high exchange fees and the gas cost of transactions stemming from proof-of-work blockchains, the superior price efficiency of CEXs involves significant risks and latency associated with delegated custody. We propose and empirically validate a stylized model of DEX liquidity provision, linking trading volume, exchange fees, and liquidity in equilibrium. Our theory identifies the quantitative conditions for DEXs to overtake CEXs in the future.
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