TY - JOUR
T1 - Customer Order Flow, Intermediaries, and Discovery of the Equilibrium Risk-Free Rate
AU - Menkveld, A.J.
AU - Sarkar, A.
AU - van der Wel, M.
PY - 2012
Y1 - 2012
N2 - Macro announcements change the equilibrium risk-free rate. We find that Treasury prices reflect part of the impact instantaneously, but intermediaries rely on their customer order flow after the announcement to discover the full impact. This customer flow informativeness is strongest when analyst macro forecasts are most dispersed. The result holds for 30-year Treasury futures trading in both electronic and open-outcry markets. We further show that intermediaries benefit from privately recognizing informed customer flow, as their own-account trading profitability correlates with customer order access. © Copyright © Michael G. Foster School of Business, University of Washington 2012.
AB - Macro announcements change the equilibrium risk-free rate. We find that Treasury prices reflect part of the impact instantaneously, but intermediaries rely on their customer order flow after the announcement to discover the full impact. This customer flow informativeness is strongest when analyst macro forecasts are most dispersed. The result holds for 30-year Treasury futures trading in both electronic and open-outcry markets. We further show that intermediaries benefit from privately recognizing informed customer flow, as their own-account trading profitability correlates with customer order access. © Copyright © Michael G. Foster School of Business, University of Washington 2012.
UR - https://www.scopus.com/pages/publications/84867835319
UR - https://www.scopus.com/inward/citedby.url?scp=84867835319&partnerID=8YFLogxK
U2 - 10.1017/S0022109012000245
DO - 10.1017/S0022109012000245
M3 - Article
SN - 0022-1090
VL - 47
SP - 821
EP - 849
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 4
ER -
