Trader positions and aggregate portfolio demand

Esen Onur, John S. Roberts and Tugkan Tuzun

The Journal of Economic Asymmetries, 2023, vol. 27, issue C

Abstract: In electronic, liquid markets traders frequently change their positions. We posit that the asymmetry in the distribution of these position changes carries important information about portfolio demand in the market. We use skewness to capture the asymmetry in position changes and from this distribution, we construct a market-wide measure for portfolio demand. Using a rich regulatory data set on S&P 500 E-mini futures, we show that this portfolio demand measure has a positive impact on prices. Decomposing our measure of portfolio demand into aggressive, passive and mixed components, we show that a one standard deviation increase in passive liquidity demand is associated with a 0.5 tick rise in prices for S&P 500 E-mini futures. Finally, we show that the distribution of position changes is crucial for explaining the execution cost of large traders.

Keywords: Large traders; Liquidity; Transaction costs (search for similar items in EconPapers)
JEL-codes: G10 G13 G14 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1703494922000482
Full text for ScienceDirect subscribers only

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:eee:joecas:v:27:y:2023:i:c:s1703494922000482

DOI: 10.1016/j.jeca.2022.e00288

Access Statistics for this article

The Journal of Economic Asymmetries is currently edited by A.G. Malliaris

More articles in The Journal of Economic Asymmetries from Elsevier
Bibliographic data for series maintained by Catherine Liu ().