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Testing the Validity of Non-Parametric Value Estimates in Treasury Bill Auctions Using Top-Up Auction Data

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  • Daniel Marszalec

    (Faculty of Economics, The University of Tokyo)

Abstract

This note uses data from top-up auctions to test the validity of value functions I derive using the Hortaçsu and McAdams (2010) methodology in my paper on Polish Treasury Bills (Marszalec, 2017). The testing procedure assumes that bidders have the same value function across both auctions; in this setting, since the top-up phase price is fixed, a presence of the top-up bid can be used to pin down the position where the value function ought to lie. The test I propose rejects in over 70% of the bidding data when a top-up bid is observed, indicating that a bias may occur in the estimation method that does not model top-up auctions explicitly. The current note doesn’t find a bound on the magnitude of the bias - but finding such a bound for both the non-parametric models of Hortaçsu and McAdams (2010) as well as the semi-parametric model of Fevrier et al. (2004)is now work in progress.

Suggested Citation

  • Daniel Marszalec, 2017. "Testing the Validity of Non-Parametric Value Estimates in Treasury Bill Auctions Using Top-Up Auction Data," CIRJE F-Series CIRJE-F-1074, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2017cf1074
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2017/2017cf1074.pdf
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    References listed on IDEAS

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    1. Lawrence M. Ausubel & Peter Cramton & Marek Pycia & Marzena Rostek & Marek Weretka, 2014. "Demand Reduction and Inefficiency in Multi-Unit Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(4), pages 1366-1400.
    2. Philippe Février & Raphaële Preget & Michael Visser, 2002. "Econometrics of Share Auctions," Working Papers 2002-09, Center for Research in Economics and Statistics.
    3. Marszalec, Daniel, 2017. "The impact of auction choice on revenue in treasury bill auctions – An empirical evaluation," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 215-239.
    4. Ali Hortaçsu & David McAdams, 2010. "Mechanism Choice and Strategic Bidding in Divisible Good Auctions: An Empirical Analysis of the Turkish Treasury Auction Market," Journal of Political Economy, University of Chicago Press, vol. 118(5), pages 833-865.
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    Cited by:

    1. Eduardo Anthony G. Marino III & Daniel Marszalec, 2020. "Auction Performance, Strategic Supply Management, and Bidder Behavior in Treasury Bill Auctions: Evidence from the Philippines," CIRJE F-Series CIRJE-F-1138, CIRJE, Faculty of Economics, University of Tokyo.

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