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Comparison of Auction Formats in Canadian Government Auctions

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  • Olivier Armantier
  • Nourredine Lafhel

Abstract

Using a rich sample of Canadian government securities auctions, we estimate the structural parameters of a share-auction model accounting for asymmetries across bidders. We find little evidence of asymmetries between participants at Canadian government nominal bond auctions. A counter-factual analysis also suggests that given the assumptions underlying the model used, including that participation and quality of information are exogenous, the discriminatory format currently in place is superior to the uniform-price format in terms of the revenue generated by the Canadian government. Both auction formats, however, are found, under the same assumptions, to be dominated by the so-called "Spanish auction" format.

Suggested Citation

  • Olivier Armantier & Nourredine Lafhel, 2009. "Comparison of Auction Formats in Canadian Government Auctions," Staff Working Papers 09-5, Bank of Canada.
  • Handle: RePEc:bca:bocawp:09-5
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    References listed on IDEAS

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    2. Abbink, Klaus & Brandts, Jordi & Pezanis-Christou, Paul, 2006. "Auctions for government securities: A laboratory comparison of uniform, discriminatory and Spanish designs," Journal of Economic Behavior & Organization, Elsevier, vol. 61(2), pages 284-303, October.
    3. Tenorio, Rafael, 1993. "Revenue Equivalence and Bidding Behavior in a Multi-unit Auction Market: An Empirical Analysis," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 302-314, May.
    4. Olivier Armantier & Erwann Sbaï, 2009. "Comparison of Alternative Payment Mechanisms for French Treasury Auctions," Annals of Economics and Statistics, GENES, issue 93-94, pages 109-133.
    5. Loretta J. Mester, 1995. "There's more than one way to sell a security: the Treasury's auction experiment," Business Review, Federal Reserve Bank of Philadelphia, issue Jul, pages 3-17.
    6. Erwann SbaÏ & Olivier Armantier, 2006. "Estimation and comparison of treasury auction formats when bidders are asymmetric," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(6), pages 745-779.
    7. Lawrence M. Ausubel & Peter Cramton & Marek Pycia & Marzena Rostek & Marek Weretka, 2014. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Review of Economic Studies, Oxford University Press, vol. 81(4), pages 1366-1400.
    8. Nyborg, Kjell G. & Sundaresan, Suresh, 1996. "Discriminatory versus uniform Treasury auctions: Evidence from when-issued transactions," Journal of Financial Economics, Elsevier, vol. 42(1), pages 63-104, September.
    9. Back, Kerry & Zender, Jaime F, 1993. "Auctions of Divisible Goods: On the Rationale for the Treasury Experiment," Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 733-764.
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    12. repec:adr:anecst:y:2009:i:93-94:p:06 is not listed on IDEAS
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    Cited by:

    1. Francisco Alvarez & Cristina Mazón, 2016. "Price volatility in the secondary market and bidders’ heterogeneous behavior in Spanish Treasury auctions," Empirical Economics, Springer, vol. 50(4), pages 1435-1466, June.
    2. Ranaldo, Angelo & Rossi, Enzo, 2016. "Uniform-price Auctions for Swiss Government Bonds: Origin and Evolution," Working Papers on Finance 1609, University of St. Gallen, School of Finance.
    3. Rydqvist, Kristian & Wu, Mark, 2016. "Pre-auction inventory and bidding behavior: Evidence from Canadian Treasury auctions," Journal of Financial Markets, Elsevier, vol. 30(C), pages 78-102.
    4. Rydqvist, Kristian & Wu, Mark, 2014. "Pre-Auction Inventory and Bidding Behavior—An Analysis of Canadian Treasury Auctions," CEPR Discussion Papers 10112, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Debt management; Financial markets; Market structure and pricing;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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