13:00 horas, Sala Consejo Torre Beauchef Poniente, 4to piso (Beauchef 851)
Ioanid Rosu, Ph.D. in Mathematics, MIT y Ph.D. in Financial Economics, MIT Sloan School, Associate Professor of Finance, HEC Paris, Associate Editor of Journal of Financial Markets
Rosu presentará el paper “Trades, Quotes and the Cost of Capital”
This paper studies the quote-to-trade (QT) ratio, and its relation with liquidity, price discovery and expected returns. Empirically, we find larger QT ratios in small or illiquid firms, yet large QT ratios are associated with low expected returns. The results are driven by quotes, not by trades. We propose a model of the QT ratio consistent with these facts.
In equilibrium, market makers monitor the market faster (and thus increase the QT ratio) in difficult-to-understand stocks. They also monitor faster when their clients are less risk averse, which reduces mispricing and lowers expected returns.