A Model of Current Market Structure and an Alternative Design Wins the Annual $100,000 Prize for Unpublished Papers
GREENWICH, Conn. - Wednesday, May 28th 2014 [ME NewsWire]
(BUSINESS
WIRE) AQR Capital Management, LLC today presented its third annual AQR
Insight Award to Eric Budish, Ph.D., Peter Cramton, Ph.D., and John J.
Shim for their path-breaking unpublished paper on market dynamics and
market structure in a world of high-frequency trading.
In their
paper, “The High-Frequency Trading Arms Race: Frequent Batch Auctions as
a Market Design Response,” Budish, an Associate Professor of Economics
at the University of Chicago; Cramton, a Professor of Economics at the
University of Maryland, College Park; and Shim, a Chicago Ph.D. student,
show how arbitrage between exchanges keeps relative prices in check,
but also imposes a cost on liquidity providers when their limit orders
become stale and are “picked off” before they are canceled.
The
paper highlights some important costs and benefits of both continuous
trading and discrete auctions in a stylized setting. While the model
leaves out several aspects of the real world such as information
asymmetry and competition between exchanges, effects that will also
strongly influence which design would be best for investors, it does
analyze one alternative market structure that addresses the narrow class
of issues studied.
“As the authors would agree, it's an early
model that omits some important aspects of the real world, but it is
vital that we better understand different market structure solutions,”
said AQR Founding Principal, David G. Kabiller. “While AQR does not
endorse the authors’ conclusions, we do believe this paper is an
important step to formalizing the study of alternative designs.”
The
AQR Insight Award was introduced in 2011 to acknowledge and encourage
academic research and recognize important and novel work on real issues
facing institutional investors. This year’s winning paper takes an
intelligent approach toward the modeling of critical issues about market
efficiency and transaction costs — topics of great interest to all
investors.
The winning paper was among five finalists that the
AQR Insight Award Committee selected out of submissions from 26
countries. All five finalists presented their research in person at the
AQR Exchange in Greenwich, Conn., on April 24.
The other finalists, awarded honorable mentions, were:
“Comomentum: Inferring Arbitrage Activity From Return Correlations”
Dong Lou, Ph.D., London School of Economics
Christopher Polk, Ph.D., London School of Economics
“Structural GARCH: The Volatility-Leverage Connection”
Robert Engle, Ph.D., NYU Stern School of Business
Emil Siriwardane, NYU Stern School of Business
“The Risk Premia Embedded in Index Options”
Torben G. Andersen, Ph.D., Kellogg School of Management, Northwestern University
Nicola Fusari, Ph.D., Johns Hopkins Carey Business School
Viktor Todorov, Ph.D., Kellogg School of Management, Northwestern University
“The Worst, the Best, Ignoring All the Rest: The Rank Effect and Trading Behavior”
Samuel M. Hartzmark, University of Southern California Marshall School of Business
To read the finalists papers or for more information about the AQR Insight Award, please visit www.aqr.com/insightaward.
About the AQR Insight Award
To
honor and encourage applied innovation in academic research, the AQR
Insight Award, sponsored by AQR Capital Management, LLC recognizes
important, unpublished papers that provide the most significant new
practical insights for tax-exempt institutional or taxable investor
portfolios. As many as three papers share a $100,000 prize.
The deadline for submitting papers for consideration in the fourth annual AQR Insight Award competition is January 15, 2015.
About AQR
AQR
is a global investment management firm built at the intersection of
financial theory and practical application. We strive to deliver
superior, long-term results for our clients by looking past market noise
to identify and isolate what matters most, and by developing ideas that
stand up to rigorous testing. Our focus on practical insights and
analysis has made us leaders in alternative and traditional strategies
since 1998.
As of April 1, 2014, AQR managed $105.1 billion*. The
firm is based in Greenwich, Connecticut, with offices in Chicago, Los
Angeles, London, Sydney and Bermuda.
* Includes assets of CNH Partners, LLC, an AQR affiliate
This
is being provided solely for information purposes and does not
constitute an offer or solicitation of an offer, or any advice or
recommendation, to purchase securities or financial instruments, and may
not be construed as such or serve as the basis of any investment
decision.
Contacts
AQR Capital Management, LLC
Marge Wyrwas, 203-742-3608
Marge.Wyrwas@aqr.com
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ابو ظبي، دولة الإمارات العربية المتحدة - يوم الخَمِيس 29 مايو 2014 [ME NewsWire]
