Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86621
Authors: 
Menkveld, Albert J.
Sarkar, Asani
van der Wel, Michel
Year of Publication: 
2007
Series/Report no.: 
Tinbergen Institute Discussion Paper 07-086/2
Abstract: 
Signed customer order flow correlates with permanent price changes in equity and nonequity markets. We exploit macro news events in the 30Y treasury futures market to identify causality from customer flow to riskfree rates. We remove the positive feedback trading part and establish that, in the 15 minutes subsequent to the news, intermediaries rely on customer orders to determine a substantial part of the announcement's effect on riskfree rates, i.e. one-third relative to the instantaneous effect. They appear to benefit from privately observing informed customers, as, in the cross-section, their own-account trade profitability correlates with access to customer flow, controlling for volatility, competition, and the macro ``surprise''.
Subjects: 
discount rate
macroeconomic announcements
customer order flow
intermediary
treasury futures
JEL: 
G14
E44
Document Type: 
Working Paper

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