Order Flow and the Formation of Dealer Bids: An Analysis of Information and Strategic Behavior in the Government of Canada Securities Auctions

51 Pages Posted: 26 Nov 2004

See all articles by Samita Sareen

Samita Sareen

Independent

Ali Hortacsu

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 2004

Abstract

Using data on Government of Canada securities auctions, this paper shows that in countries where direct access to primary issuance is restricted to government securities dealers, Order-flow information is a key source of private information for these security dealers. Order-flow information is revealed to a security dealer through his interactions with customers, who can place bids in the auctions only through the security dealer. Since each dealer interacts with a different set of customers, they, in effect, see different portions of the market demand and supply curves, leading to differing private inferences of where the equilibrium price might.

Keywords: Treasury auctions, Behavioural finance

JEL Classification: D82, G14, L88

Suggested Citation

Sareen, Samita and Hortacsu, Ali, Order Flow and the Formation of Dealer Bids: An Analysis of Information and Strategic Behavior in the Government of Canada Securities Auctions (December 2004). Available at SSRN: https://ssrn.com/abstract=624463 or http://dx.doi.org/10.2139/ssrn.624463

Ali Hortacsu

University of Chicago - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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