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http://ssrn.com/abstract=966059
 
 

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Customer Order Flow, Intermediaries, and Discovery of the Equilibrium Risk-free Rate


Albert J. Menkveld


VU University Amsterdam; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA); Duisenberg School of Finance

Asani Sarkar


Federal Reserve Bank of New York

Michel Van der Wel


Erasmus University Rotterdam; CREATES; ERIM; Tinbergen Institute

March 9, 2011

Journal of Financial and Quantitative Analysis (JFQA), 17, 821-849
EFA 2007 Ljubljana Meetings Paper
FRB of New York Staff Report No. 307

Abstract:     
Macro announcements change the equilibrium riskfree rate. We find that treasury prices reflect part of the impact instantaneously, but intermediaries rely on their customer order flow after the announcement to discover the full impact. This customer flow informativeness is strongest when analyst macro forecasts are most dispersed. The result holds for 30-year treasury futures trading in both electronic and open-outcry markets. We further show that intermediaries benefit from privately recognizing informed customer flow, as their own-account trading profitability correlates with customer order access.

Number of Pages in PDF File: 44

Keywords: riskfree rate, macroeconomic announcements, customer order flow, intermediary, treasury futures

JEL Classification: G14, E44

working papers series


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Date posted: March 1, 2007 ; Last revised: November 20, 2012

Suggested Citation

Menkveld, Albert J. and Sarkar, Asani and van der Wel, Michel, Customer Order Flow, Intermediaries, and Discovery of the Equilibrium Risk-free Rate (March 9, 2011). Journal of Financial and Quantitative Analysis (JFQA), 17, 821-849; EFA 2007 Ljubljana Meetings Paper; FRB of New York Staff Report No. 307. Available at SSRN: http://ssrn.com/abstract=966059 or http://dx.doi.org/10.2139/ssrn.966059

Contact Information

Albert J. Menkveld (Contact Author)
VU University Amsterdam ( email )
De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31 20 5986130 (Phone)
+31 20 5986020 (Fax)
Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )
Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands
Duisenberg School of Finance ( email )
Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands
Asani Sarkar
Federal Reserve Bank of New York ( email )
Research Department
33 Liberty Street
New York, NY 10045
United States
212-720-8943 (Phone)
212-720-1582 (Fax)
HOME PAGE: http://www.newyorkfed.org/research/economists/sarkar/pub.html
Michel Van der Wel
Erasmus University Rotterdam ( email )
Burg. Oudlaan 50
Rotterdam, NL 3062 PA
Netherlands
CREATES ( email )
School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark
ERIM ( email )
P.O. Box 1738
3000 DR Rotterdam
Netherlands
Tinbergen Institute ( email )
Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands
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