Improved Methods for Obtaining Information from Distributed Dealer Markets
14 Pages Posted: 21 Sep 1998
Date Written: September 4, 1998
Prices and liquidity on distributed dealer markets are known to market participants but not to external observers. Hence, the strategy of polling "n" respondents, coupled with data reduction using a robust location estimator, has been widely employed, especially in the context of cash-settled futures contracts.
In this paper, we offer a market microstructure interpretation of the information obtained by polling, and propose improvements for many elements of the polling process. The choice of estimator in this context reflects a tradeoff between statistical efficiency and vulnerability to manipulation. We offer empirical evidence, based on polling in India's call money market, about this tradeoff. The results suggest that the adaptive trimmed mean (ATM) has advantages over the fixed trimming procedures presently used by futures exchanges.
JEL Classification: G13, G14, G15
Suggested Citation: Suggested Citation