Most ETFs replicate indexes licensed by index providers. We show that providers wield strong market power and charge large markups to are passed on investors. document three stylized facts: (i) the provider is highly concentrated; (ii) investors care about identities of providers, although they explain little variation in ETF returns; (iii) over one-third expense ratios paid as licensing fees A structural decomposition attributes 60% providers' markups. Counterfactual analyses improving...

Abstract In addition to the standard individual‐security‐based specified pool (SP) contract, agency mortgage‐backed securities (MBS) are actively traded via to‐be‐announced (TBA) contract that sets a uniform price for cohort of heterogeneous securities. We provide empirical support economic impact TBA trading on MBS issuers' security design: issuers pick low‐quality loans and them together into few MBS. then conduct quantitative analysis show TBA‐trading‐induced strategic design increases...

Abstract Many of the Federal Reserve’s (the Fed’s) monetary policy operations involve trading with primary dealers. We find that, for agency MBS, dealers charge 2.5 cents (per $100 face value) higher selling to Fed than non-Fed customers. Controlling same dealer, security, and time, this discriminatory pricing likely arises from dealers’ market power rather inventory costs. Further, matching trade size reduces price differential by more half, implying that greatly relates Fed’s purchases in...

Major projects are the important platform for enhancing a country’s comprehensive national power and strengthening its capacity independent innovation. Although major in China have made remarkable achievements, willingness to cooperate innovate has not achieved desired target. In this paper, evolutionary game model of cooperative innovation behavior general contractors subcontractors is constructed by considering reputational factors. Through theoretical derivation, influence distribution...

Existing literature on dealer liquidity provision and inventory management has focused cost. I uncover a new benefit channel: dealers strategically build in order to compete for market share. The reduces the effective cost of holding, thereby lowering price provision. Using TRACE data U.S. corporate bonds, show that, excluding 2008 crisis, per trade is average 8.4 basis points larger than result reversed during when suffer significantly higher

Under the development mode of deep blending emerging technologies, major projects are important for enhancing China's comprehensive national strength and independent innovation capability. Based on social benefits projects, considering influence reputation factors, an evolutionary game model composed a general contractor subcontractor is established. This paper studies various factors including income distribution coefficient collaborative innovation, MATLAB simulation software...

We study the limited risk-bearing capacity of intermediaries and its implication on asset prices. measure intermediaries' with a new measure: "intermediary elasticity", which is defined as price response to marginal unit risk induced by trading demand shocks. apply our framework foreign exchange (FX) market identify three key traded factors Dollar, Carry, Pan-European — that account for 90% borne during FX trading. Through instrumental variable analysis, we quantify intermediary elasticity...

Most ETFs replicate indexes licensed by index providers. We show that providers wield strong market power and charge large markups to are passed on investors. document three stylized facts: (i) the provider is highly concentrated; (ii) investors care about identities of providers, although they explain little variation in ETF returns; (iii) over one-third management fees paid as licensing A structural decomposition attributes 60% providers’ markups. Counterfactual analyses improving...

Dealers can choose between two intermediation methods---providing immediacy to customers using own inventory and making matches customers' order flows. We show that dealers have an incentive prioritize turnover for provision, rather than customers. Compared a counterfactual scenario without this incentive, in equilibrium provide more extract extra rents. the counterfactual, decreases price but increases bid-ask spread. The provision lowers welfare assets with high substitutability, raises...

Agency MBS are traded via both specified pool (SP) contracts for individual securities and to-be-announced (TBA) a cohort of heterogeneous securities. We document three economic effects this secondary-market structure on issuers' security design strategies: (1) low-value high-value loans securitized into separate groups sold in TBA SP markets respectively; (2) issuers together MBS, but different MBS; (3) larger take more advantage trading when designing MBS. further show that...

Agency MBS issuers can choose among three securitization venues: individual where an issuer uses her own loans to create MBS, collective different deliver into a common and cash window sell Fannie Mae or Freddie Mac who then conduct securitization. We find that with great immediate liquidity needs (e.g., small shadow banks) prefer makes payment. Moreover, relatively high-value (traditional while low-value (shadow banks, especially fintech issuers) securitization; this is because have...

Dealers can choose between two intermediation methods: providing immediacy to customers using their own inventory and making matches customers’ order flows. We show that dealers have an incentive prioritize turnover for provision rather than customers. Compared with a counterfactual scenario without this incentive, in equilibrium provide more extract extra rents. the counterfactual, decreases price but increases bid–ask spread. The lowers welfare assets high substitutability raises low...

To promote low-carbon development of the construction industry and popularize green buildings (GBs), considering influence marketing efforts innovation capability on GB market demand, this paper constructs multiple incentive decision models based contract theory, analyzes developers’ decision-making behaviors for incentivizing contractors’ technology (GTI) under different models; explores impacts greenness preference service quality prices, sales levels effort levels. In addition, cost...

I study risk-driven price impacts---arbitrageurs absorb fundamental risk induced by uninformative flows, and impact is the arbitrageurs' compensation for taking risk. Based on commonality in flow-induced risk, decompose cross-sectional asset flows into factor idiosyncratic flows. show that impacts depend only but not To obtain this result, use arbitrage pricing to derive linear model of impacts. overcome two challenges: (i) develop flow-based stochastic discount (F-SDF) approach (ii)...

How does the predictability of future noisy flows impact asset prices? We answer this question by developing a dynamic multi-asset price model with flows. The setup is general---both and fundamental risks can be correlated for cross-section assets, exhibit lag-one Vector AutoRegression (VAR) structure. To explicitly solve model, we propose new structural VAR restriction, which endogenously uniquely pins down asset-pricing factors. In equilibrium, variations impacts across assets obey factor...

We introduce reducible intermediation chains in order to study the incentives of corporate bond dealers. find that three quarters mitigate search frictions, while remaining one-quarter arise due dealers' rent-seeking incentive. provide an OTC model à la Stahl (1989) and show additional competition channel is necessary for story apply markets.

We propose a new approach to modeling informed order flows. Our generalizes arbitrage pricing incorporate both information and demand effects, giving rise quadratic factor model of price impacts. provides flexible framework characterize how flows influence the variance payoff distributions, thereby generating channel fire sales. Furthermore, we solve an open question concerning learning process in context multiple assets with correlated payoffs.

The telecommunications industry in China is characterized by its competitive dynamics, with numerous operators vying for market share. However, this paper delves into a concerning issue within the sector, namely price collusion. Price collusion, form of anti-competitive behavior, involves multiple telecom secretly conspiring to manipulate prices their mutual benefit. This examines concept various forms, and economic impact on consumers market. It also explores pricing strategies employed...

In this paper, we study market design issues for heterogeneous assets. We consider a setting with multiple assets and traders. The new modeling feature is that social planner can decide to shut down some asset markets so no traders trade these show closing increase the total volume of trades by all This because smaller number available reduce coordination failures between different traders, therefore improves overall matching efficiency. Using numerical simulation, optimal numbers open under...

Many of the Federal Reserve's (the Fed's) monetary policy operations involve trading with primary dealers. We find that, for agency MBS, dealers charge 2.5 cents (per \$100 face value) higher selling to Fed than non-Fed customers. Controlling same dealer, security, and time, this discriminatory pricing likely arises from dealers' market power rather inventory cost. Further matching trade size reduces price differential by more half, implying that greatly relates Fed's purchases in large...

We study risk-driven price impacts---arbitrageurs absorb fundamental risk induced by uninformative flows, and impact is the arbitrageurs' compensation for taking risk. Using U.S. equity mutual fund flow data, we decompose cross-sectional asset flows into factor idiosyncratic flows. The Fama-French three-factor explains about 70% of variation impacts. These dislocations revert completely in six months. In contrast, generate non-reverting Our evidence supports theories which impacts depend...