Information Revelation in Decentralized Markets

Björn Hagströmer, Albert J. Menkveld

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

How does information get revealed in decentralized markets? We test several hypotheses inspired by recent dealer-network theory. To do so, we construct an empirical map of information revelation where two dealers are connected based on the synchronicity of their quote changes. The tests, based on the euro to Swiss franc spot rate (EUR/CHF) quote data including the 2015 crash, largely support theory: strongly connected (i.e., central) dealers are more informed. Connections are weaker when there is less to be learned. The crash serves to identify how a network forms when dealers are transitioned from no-learning to learning, that is, from a fixed to a floating rate.

Original languageEnglish
Pages (from-to)2751-2787
Number of pages37
JournalJournal of Finance
Volume74
Issue number6
DOIs
Publication statusPublished - 1 Dec 2019

Fingerprint

Dive into the research topics of 'Information Revelation in Decentralized Markets'. Together they form a unique fingerprint.

Cite this