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Profitability and Pricing in Treasury Bill Auctions: Evidence from Pakistan

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Author Info
Daniel C. Hardy (Monetary and Exchange Affairs Department, International Monetary Fund, Washington, D. C.)
Abstract

Behaviour in the first three years of auctions for Pakistani treasury bills is studied. Bidding strategies rapidly converged to a consistent pattern after the auctions started in 1991. Factors that influenced the expected profitability of auction participation are identified. Auction participation was on average low and did not differ between types of bidders. Prices bids are found to reflect both ‘buy and sell’ and ‘buy and hold’ strategies, and were affected by risk considerations and bidder-specific variables. The Pakistani experience suggests the robustness of auctions as a market-based allocation mechanism, and their value in public debt management.

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Publisher Info
Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

Volume (Year): 40 (2001)
Issue (Month): 1 ()
Pages: 27-48
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Handle: RePEc:pid:journl:v:40:y:2001:i:1:p:27-48

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  1. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 3-22, Summer. [Downloadable!] (restricted)
  2. Spindt, Paul A. & Stolz, Richard W., 1992. "Are US treasury bills underpriced in the primary market?," Journal of Banking & Finance, Elsevier, vol. 16(5), pages 891-908, September. [Downloadable!] (restricted)
  3. Bolten, Steven, 1973. "Treasury Bill Auction Procedures: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 28(3), pages 577-85, June. [Downloadable!] (restricted)
  4. Nadeem Ul Haque, 1997. "Financial Market Reform in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(4), pages 839-854. [Downloadable!]
  5. Umlauf, Steven R., 1993. "An empirical study of the Mexican Treasury bill auction," Journal of Financial Economics, Elsevier, vol. 33(3), pages 313-340, June. [Downloadable!] (restricted)
  6. Bikhchandani, Sushil & Huang, Chi-fu, 1993. "The Economics of Treasury Securities Markets," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 117-34, Summer. [Downloadable!] (restricted)
  7. Nautz, D. & Wolfstetter, E., 1997. "Bid shading and risk aversion in multi-unit auctions with many bidders," Economics Letters, Elsevier, vol. 56(2), pages 195-200, October. [Downloadable!] (restricted)
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