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Industrial Organization, Order Internalization, and Invariance

Author

Listed:
  • Albert S. Kyle

    (University of Maryland)

  • Anna A. Obizhaeva

    (New Economic School)

  • Yajun Wang

    (University of Maryland)

Abstract

We present a one-period model of oligopolistic strategic trading among symmetric traders who agree to disagree about the precision of their private signals. We derive several invariance relationships relating the number of firms, number of firm's employees, average trade size, price impact, and pricing accuracy to dollar volume and returns volatility. Since a substantial part of order flow is often internalized within firms and does not reach the marketplace, invariance relationships can be modified to account for internalized order flow.

Suggested Citation

  • Albert S. Kyle & Anna A. Obizhaeva & Yajun Wang, 2020. "Industrial Organization, Order Internalization, and Invariance," Working Papers w0274, New Economic School (NES).
    • Handle: RePEc:abo:neswpt:w0274
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    File URL: https://www.nes.ru/files/Preprints-resh/WP274.pdf
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    References listed on IDEAS

    as
    1. Torben G. Andersen & Oleg Bondarenko & Albert S. Kyle & Anna Obizhaeva, 2016. "Intraday Trading Invariance in the E-mini S&P 500 Futures Market," Working Papers w0229, Center for Economic and Financial Research (CEFIR).
    2. Anna, Petrenko, 2016. "Мaркування готової продукції як складова частина інформаційного забезпечення маркетингової діяльності підприємств овочепродуктового підкомплексу," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 2(1), March.
    3. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 503-530.
    4. Thomas Philippon & Ariell Reshef, 2012. "Wages and Human Capital in the U.S. Finance Industry: 1909--2006," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(4), pages 1551-1609.
    5. Albert S. Kyle, 1989. "Informed Speculation with Imperfect Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(3), pages 317-355.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    invariance; agreement to disagree; market power; trade size; price impact; pricing accuracy; volume; volatility; market microstructure; industrial organization;
    All these keywords.

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