Information impacts dealers’ behaviour in crises – BoE paper

“Information chasing” helps explain how prices are set during liquidity shocks, authors say

Bank of England

A hunt for information in stressed conditions can help explain why dealers initially cut liquidity costs for some investors and then raise costs for the wider market, new research finds.

In the working paper, published by the Bank of England, authors Robert Czech and Win Monroe explore regulatory data on transactions in the UK government bond market. They say the data is detailed enough to allow them to control for potential confounding factors, and to track the evolution of a crisis in narrow

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