Experimentation in Financial Markets

Massimo Massa () and Andrei Simonov
Additional contact information
Massimo Massa: INSEAD and CEPR, 77305 Fontainebleau Cedex, France

Management Science, 2009, vol. 55, issue 8, 1377-1390

Abstract: In this paper, we use a unique data set on the Italian interdealer bond market to empirically estimate the process of strategic experimentation. The results show how the information generated in the process of interdealer trading affects the incentive to experiment. Upon receipt of an order, dealers deliberately engage in trade with other dealers either to exploit the information contained in the order they receive or, if they are uncertain about its quality, to assess it by actively experimenting with other dealers. We therefore identify "hiding" and "experimenting" as main types of dealer strategies.

Keywords: interdealer trading; experimentation; learning; trading strategies (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.1090.1030 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:55:y:2009:i:8:p:1377-1390

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().