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Econometric Models of Limit-Order Executions

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  • Andrew W. Lo
  • A. Craig MacKinlay
  • June Zhang

Abstract

This paper attempts to assess whether money can generate persistent economic" fluctuations in dynamic general equilibrium models of the business cycle. We show that a small" nominal friction in the goods market can make the response of output to monetary shocks large" and persistent if it is amplified by real wage rigidity in the labor market. We also argue that" given the level of real wage rigidity that is observed in developed countries nominal stickiness might be sufficient for money to produce economic fluctuations as persistent" as those observed in the data.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6257.

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Date of creation: Nov 1997
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Publication status: published as Lo, Andrew W., A. Craig MacKinlay and June Zhang. "Econometric Models Of Limit-Order Executives," Journal of Financial Economics, 2002, v65(1,Jul), 31-71.
Handle: RePEc:nbr:nberwo:6257

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  7. Jerry A. Hausman & Andrew W. Lo & A. Craig MacKinlay, 1991. "An Ordered Probit Analysis of Transaction Stock Prices," NBER Working Papers 3888, National Bureau of Economic Research, Inc.
  8. Ananth N. Madhavan, . "Trading Mechanisms in Securities Markets," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 16-90, Wharton School Rodney L. White Center for Financial Research.
  9. Harris, Lawrence & Hasbrouck, Joel, 1996. "Market vs. Limit Orders: The SuperDOT Evidence on Order Submission Strategy," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 31(02), pages 213-231, June.
  10. Sugato Chakravarty & Craig Holden, 2002. "An Integrated Model of Market and Limit Orders," Finance, EconWPA 0201004, EconWPA.
  11. Harris, Lawrence, 1990. "Estimation of Stock Price Variances and Serial Covariances from Discrete Observations," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 25(03), pages 291-306, September.
  12. Lo, Andrew W & Wang, Jiang, 1995. " Implementing Option Pricing Models When Asset Returns Are Predictable," Journal of Finance, American Finance Association, American Finance Association, vol. 50(1), pages 87-129, March.
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  14. Kenneth A. Kavajecz, . "A Specialist's Quoted Depth as a Strategic Choice Variable," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 12-96, Wharton School Rodney L. White Center for Financial Research.
  15. Easley, David & O'Hara, Maureen, 1991. " Order Form and Information in Securities Markets," Journal of Finance, American Finance Association, American Finance Association, vol. 46(3), pages 905-27, July.
  16. Glosten, Lawrence R, 1989. "Insider Trading, Liquidity, and the Role of the Monopolist Specialist," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 62(2), pages 211-35, April.
  17. Biais, Bruno & Hillion, Pierre & Spatt, Chester, 1995. " An Empirical Analysis of the Limit Order Book and the Order Flow in the Paris Bourse," Journal of Finance, American Finance Association, American Finance Association, vol. 50(5), pages 1655-89, December.
  18. Parlour, Christine A, 1998. "Price Dynamics in Limit Order Markets," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 11(4), pages 789-816.
  19. Lo, Andrew W. & MacKinlay, A. Craig & Zhang, June, 2002. "Econometric models of limit-order executions," Journal of Financial Economics, Elsevier, Elsevier, vol. 65(1), pages 31-71, July.
  20. Ball, Clifford A, 1988. " Estimation Bias Induced by Discrete Security Prices," Journal of Finance, American Finance Association, American Finance Association, vol. 43(4), pages 841-65, September.
  21. Glosten, Lawrence R, 1994. " Is the Electronic Open Limit Order Book Inevitable?," Journal of Finance, American Finance Association, American Finance Association, vol. 49(4), pages 1127-61, September.
  22. Seppi, Duane J, 1997. "Liquidity Provision with Limit Orders and a Strategic Specialist," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 10(1), pages 103-50.
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