Are the Primary Dealers of the New York Fed Really Special?

37 Pages Posted: 17 Jan 2022

See all articles by Danilo A Giannone

Danilo A Giannone

Gener8; The Alan Turing Institute

Cesare Robotti

Warwick Business School

Date Written: January 17, 2022

Abstract

He, Kelly and Manela (2017, HKM) offer strong empirical support to innovations in the equity capital ratio of the New York Federal Reserve (NY Fed) primary dealers as a priced risk factor across major asset classes. This leads them to conclude that primary dealers are special marginal investors that differ from the overall broker-dealer sector. Using information that is publicly available on the NY Fed's website, we construct HKM's intermediary capital ratio and risk factors and show that their results are likely driven by some heavy and ad-hoc trimming of the list of primary dealers. Based on our new sample, there is simply no evidence that the NY Fed's primary dealers are special marginal investors across any of the seven asset classes considered by HKM.

Keywords: Primary dealers; Event study; Cross-sectional asset pricing.

JEL Classification: G12; G20; C12; C14; C15

Suggested Citation

Giannone, Danilo Antonino and Robotti, Cesare, Are the Primary Dealers of the New York Fed Really Special? (January 17, 2022). WBS Finance Group Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=4010787 or http://dx.doi.org/10.2139/ssrn.4010787

Danilo Antonino Giannone (Contact Author)

Gener8 ( email )

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2nd Floor
London, London NW8 8PL
Great Britain

HOME PAGE: http://https://gener8ads.com

The Alan Turing Institute ( email )

British Library, 96 Euston Road
96 Euston Road
London, NW12DB
United Kingdom

Cesare Robotti

Warwick Business School ( email )

West Midlands, CV4 7AL
United Kingdom

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