Customer flow, intermediaries, and the discovery of the equilibrium riskfree rate

Macro announcements change the equilibrium riskfree rate. We find that treasury prices reflect part of the impact instantaneously, but intermediaries rely on their customer order flow in the 15 minutes after the announce
Macro announcements change the equilibrium riskfree rate. We find that treasury prices reflect part of the impact instantaneously, but intermediaries rely on their customer order flow in the 15 minutes after the announcement to discover the full impact. We show that this customer flow informativeness is strongest at times when analyst forecasts of macro variables are highly dispersed. We study 30 year treasury futures to identify the customer flow. We further show that intermediaries appear to benefit from privately recognizing informed customer flow, as, in the cross-section, their own-account trade profitability correlates with access to customer orders, controlling for volatility, competition, and the announcement surprise. These results suggest that intermediaries learn about equilibrium riskfree rates through customer orders.
show moreshow less

Download full text files

Export metadata

  • Export Bibtex
  • Export RIS

Additional Services

    Share in Twitter Search Google Scholar
Metadaten
Author:Albert J. Menkveld, Asani Sarkar, Michel van der Wel
URN:urn:nbn:de:hebis:30-62269
Parent Title (German):CFS working paper series ; 2008, 47
Series (Serial Number):CFS working paper series (2008, 47)
Document Type:Working Paper
Language:English
Date of Publication (online):2009/01/29
Year of first Publication:2008
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2009/01/29
Tag:Customer Flow ; Intermediary ; Macroeconomic Announcements ; Riskfree Rate ; Treasury Futures
HeBIS PPN:210194979
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:E44 Financial Markets and the Macroeconomy
G14 Information and Market Efficiency; Event Studies
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

$Rev: 11761 $