Hedging Winner'S Curse With Multiple Bids: Evidence From The Portuguese Treasury Bill Auction

Michael Gordy

The Review of Economics and Statistics, 1999, vol. 81, issue 3, 448-465

Abstract: Auctions of government securities typically permit bidders to enter multiple price-quantity bids. Despite the widespread adoption of this institutional feature and its use by bidders, the motivations behind its use and its effects on auction outcomes are not well understood theoretically and have been little explored empirically. This paper proposes that bidders use multiple bids to adjust for winner's curse: By spreading her bids, a bidder aligns her outcome more closely to the aggregate outcome of the auction. This hypothesis is tested using bidding data from treasury bill auctions in Portugal. I find that, ceteris paribus, a bidder submits a greater number of bids and disperses prices on these bids more widely when there is a greater potential for winner's curse. In particular, both these measures of bid-spreading increase with the volatility of market interest rates and the expected number of participating well-informed bidders. © 1999 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Date: 1999
References: Add references at CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/003465399558373 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Hedging Winner's Curse with Multiple Bids: Evidence from the Portuguese Treasury Bill Auction (1997)
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:tpr:restat:v:81:y:1999:i:3:p:448-465

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by The MIT Press ().