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Activity Number:
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473
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Type:
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Contributed
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Date/Time:
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Wednesday, August 1, 2007 : 2:00 PM to 3:50 PM
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Sponsor:
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Business and Economics Statistics Section
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| Abstract - #308862 |
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Title:
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Competitive Inventory Management in Treasury Markets
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Author(s):
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Rohan Christie-David*+ and William T. Moore and Arjun Chatrath
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Companies:
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University of Louisville and University of South Carolina and University of Portland
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Address:
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2814 Shoemaker Dr, Louisville, KY, 40241,
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Keywords:
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Treasury ; Bid ; Ask ; Spreads ; Inventory ; Management
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Abstract:
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Using on-the-run two-year and 10-year Treasury Notes we test four hypotheses about inventory costs and dealers' quote-setting behavior. First we decompose the bid-ask spread and then examine whether dealers in this market make larger adjustments in the inventory component (1) following macroeconomic news events, (2) towards the start and end of New York trading hours, (3) before open market operations by the Federal Reserve, and (4) when transaction sizes are relatively large. Our findings provide support for all four hypotheses.
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