Why does public news augment information asymmetries?

Crego, Julio A.

doi:10.1016/j.jfineco.2019.05.020

Cited by 20 publications

(6 citation statements)

References 42 publications

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“…Some studies show that the effect of news, represented by online news, oil price news, and news stories, on oil prices is immediately apparent in the short term ( Brandt and Gao, 2019 ; Crego, 2020 ; Gupta and Banerjee, 2019 ; Kilian and Vega, 2011 ; Li et al, 2019 ; Loughran et al, 2019 ). For example, Maslyuk-Escobedo et al (2017) find that news sentiments related to energy cojumps with the futures and spot earnings in energy commodities, such as heating oil, gasoline and crude oil.…”

Section: Introductionmentioning

confidence: 99%

The role of coronavirus news in the volatility forecasting of crude oil futures markets: Evidence from China

et al. 2021

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Section: Introductionmentioning

confidence: 99%

The role of coronavirus news in the volatility forecasting of crude oil futures markets: Evidence from China

et al. 2021

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“…We primarily check whether the basic assumption that the news announcements drive market illiquidity, which is suggested by previous studies (e.g., Crego, 2020; Lucca & Moench, 2015), is empirically valid in the KOSPI 200 index futures market. Here, the announcements of the base rate by the central bank (i.e., BOK) are employed as the typical central bank communication.…”

Section: Resultsmentioning

confidence: 99%

Who pays the liquidity cost? Central bank announcements and adverse selection

Ryu

Webb

2023

Journal of Futures Markets

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This study examines whether the composition of market participants contributes to shaping market liquidity around central bank announcements. By analyzing transaction‐level data from a stock index futures market, we find that the roles of foreign and domestic institutional investors in taking or providing liquidity, respectively, are switched following the news announcements. The participation of domestic (foreign) institutions is negatively (positively) associated with liquidity provision shortly after the announcements, whereas they provide (consume) liquidity in general. The change in domestic institutions' roles is attributed to their advantages in processing local news as it is pronounced when they actively participate. Domestic individuals remain largely noisy and unresponsive. Overall, the results support the existence of adverse selection costs in the order‐driven context and imply that institutional investors may trade with the wind when they have information superiority.

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“…A heterogeneity in beliefs or in signals might generate such stronger position taking (e.g., Kim and Verrecchia 1994). Or, in a more recent paper, Crego (2019) proposes a channel by which risk-averse informed traders strategically wait to trade on their (idiosyncratic) signal until the arrival of a public signal which removes significant uncertainty. Either way, member positions would increase in magnitude and CCP exposure rises as a result.…”

Section: Hypothesesmentioning

confidence: 99%

Central Counterparty Exposure in Stressed Markets

Huang

Menkveld

2021

Management Science

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Time is valuable, particularly in stressed markets. Because central counterparties (CCPs) have become systemically important, we need to understand the dynamics of their exposure toward clearing members at high frequencies. We track such exposure and decompose it, yielding the following insights. The composition of CCP exposure is fundamentally different in the tails. At extreme levels or during rapid increases, there is elevated crowding. This is the result of clearing members all concentrating their positions on a single security or a particular portfolio, which is desirable if motivated by hedging but worrying if due to speculation.

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Why does public news augment information asymmetries?

Cited by 20 publications

References 42 publications

The role of coronavirus news in the volatility forecasting of crude oil futures markets: Evidence from China

The role of coronavirus news in the volatility forecasting of crude oil futures markets: Evidence from China

Who pays the liquidity cost? Central bank announcements and adverse selection

Central Counterparty Exposure in Stressed Markets

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