Clients' connections

Péter Kondor and Gabor Pinter

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We propose a new measure of private information in decentralised markets - connections - defined as the number of dealers with whom a client trades in a time period. Using proprietary data for the UK government bond market, we show that clients have systematically better performance when having more connections, and this effect is stronger during macroeconomic announcements. Time-variation in market-wide connections also helps explain yield dynamics. Given our novel measure, we present two applications suggesting that (i) dealers pass on information, acquired from their informed clients, to their subsidiaries, and (ii) informed clients better predict the order-flow intermediated by their dealers.

Keywords: private information; client-dealer connections; government bond market (search for similar items in EconPapers)
JEL-codes: G12 G14 G24 (search for similar items in EconPapers)
Pages: 81 pages
Date: 2019-07-01
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:118933

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