Bidding and Performance in Repo Auctions: Evidence from ECB Open Market Operations
Repo auctions are multiunit auctions regularly used by central banks to inject liquidity into the banking sector. Banks have a fundamental need to participate because they have to satisfy reserve requirements. Superficially, repo auctions resemble treasury auctions; the format and rules are similar and there is an active secondary market for the underlying asset. However, using a bidder level dataset of the European Central Bankâ€™s main repo auctions, we find evidence that the economic issues in repo auctions may be very diï¬€erent. Unlike what has been documented in the treasury auctions literature, we find no evidence that private information and the winnerâ€™s curse are important issues. Instead our findings suggest that bidders are more concerned with the loserâ€™s nightmare, collateral, and future interest rate reductions by the ECB. Small and large bidders use diï¬€erent strategies, with large bidders performing better.
|Date of creation:||01 Feb 2004|
|Date of revision:|
|Contact details of provider:|| Postal: 110 Westwood Plaza, Los Angeles, CA. 90095|
Web page: http://www.escholarship.org/repec/anderson_fin/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hoidal Bjonnes, Geir, 2001. "Winner's Curse in Discriminatory Price Auctions: Evidence from the Norwegian Treasury Bill Auctions," SIFR Research Report Series 3, Institute for Financial Research.
- Robert Wilson, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 511-518.
- Samita Sareen & Ali Hortacsu, 2004. "Order Flow and the Formation of Dealer Bids: An Analysis of Information and Strategic Behavior in the Government of Canada Securities Auctions," Working Papers 2004.145, Fondazione Eni Enrico Mattei.
- Matti Keloharju & Kjell G. Nyborg & Kristian Rydqvist, 2005.
"Strategic Behavior and Underpricing in Uniform Price Auctions: Evidence from Finnish Treasury Auctions,"
Journal of Finance,
American Finance Association, vol. 60(4), pages 1865-1902, 08.
- Keloharju, Matti & Nyborg, Kjell G & Rydqvist, Kristian, 2002. "Strategic Behaviour and Underpricing in Uniform Price Auctions: Evidence from Finnish Treasury Auctions," CEPR Discussion Papers 3586, C.E.P.R. Discussion Papers.
- Keloharju, Matti & Nyborg, Kjell G. & Rydqvist, Kristian, 2004. "Strategic Behavior and Underpricing in Uniform Price Auctions: Evidence from Finnish Treasury Auctions," University of California at Los Angeles, Anderson Graduate School of Management qt6v17p79w, Anderson Graduate School of Management, UCLA.
- Milgrom, Paul R & Weber, Robert J, 1982.
"A Theory of Auctions and Competitive Bidding,"
Econometric Society, vol. 50(5), pages 1089-1122, September.
- Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer.
- Chatterjea, Arkadev & Jarrow, Robert A., 1998. "Market Manipulation, Price Bubbles, and a Model of the U.S. Treasury Securities Auction Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(02), pages 255-289, June.
- Bollerslev, Tim, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
Journal of Econometrics,
Elsevier, vol. 31(3), pages 307-327, April.
- Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
- Hamilton, James D, 1996. "The Daily Market for Federal Funds," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 26-56, February.
- Simon, David P., 1994. "Markups, quantity risk, and bidding strategies at treasury coupon auctions," Journal of Financial Economics, Elsevier, vol. 35(1), pages 43-62, February.
- Breitung, Jorg & Nautz, Dieter, 2001. "The empirical performance of the ECB's repo auctions: evidence from aggregated and individual bidding data," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 839-856, November.
- Cammack, Elizabeth B, 1991. "Evidence on Bidding Strategies and the Information in Treasury Bill Auctions," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 100-130, February.
- Kjell G. Nyborg, 2004.
"Multiple Unit Auctions and Short Squeezes,"
Review of Financial Studies,
Society for Financial Studies, vol. 17(2), pages 545-580.
- Hartmann, Philipp & Manna, Michele & Manzanares, Andrés, 2001.
"The microstructure of the euro money market,"
Working Paper Series
0080, European Central Bank.
- Nyborg, Kjell G. & Strebulaev, Ilya A., 2001. "Collateral and short squeezing of liquidity in fixed rate tenders," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 769-792, November.
- Kjell G. Nyborg & Kristian Rydqvist & Suresh M. Sundaresan, 2002. "Bidder Behavior in Multiunit Auctions: Evidence from Swedish Treasury Auctions," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 394-424, April.
- Tuomo Vuolteenaho, 2002. "What Drives Firm-Level Stock Returns?," Journal of Finance, American Finance Association, vol. 57(1), pages 233-264, 02.
- 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.
When requesting a correction, please mention this item's handle: RePEc:cdl:anderf:qt9878h0kn. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff)
If references are entirely missing, you can add them using this form.