Convergence trading with wealth effects: an amplification mechanism in financial markets

2001

257 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/ff531fdda1a5cff32d844374fa1eebb697c3c86a

Citations in the corpus

Equilibrium and welfare in markets with financially constrained arbitrageurs (2002, unknown): “He shows that arbitrageurs may amplify the e ects of noise shocks on prices.10 Kyle and Xiong (2001) assume two risky assets, and show that arbitrageurs may induce nancial contagion, in the form of an increased correlation in asset prices.”
Heterogeneous Expectations and Bond Markets (2010, methodology): “6A similar wealth amplification mechanism has been employed by Xiong (2001) to explain the observed high volatility and low liquidity during the crisis period of the hedge fund Long-Term Capital Management in the late summer of 1998.”
Credit Expansion and Neglected Crash Risk (2017, background): “…of equity prices, especially of bank stocks, with credit expansion provide a 1 See, for example, Shleifer and Vishny (1997), Xiong (2001), Kyle and Xiong (2001), Gromb and Vayanos (2002), Brunnermeier and Pedersen (2009), He and Krishnamurthy (2012, 2013), and Brunnermeier and Sannikov (2014).”
Risk in Dynamic Arbitrage: The Price Effects of Convergence Trading (2009, background): “In contrast to previous models focusing on potential losses in convergence trading (Shleifer and Vishny, 1997, Xiong, 2001, Gromb and Vayanos, 2003, Liu and Longstaff, 2004), my mechanism is not based on the amplification of exogenous shocks by the capital constraint.”
Limits of Arbitrage (2010, unknown): “…the potential to deliver a more useful framework for designing 19The same is true for models in which arbitrageur wealth effects derive from wealth-dependent risk aversion rather than explicit financial constraints (e.g., Kyle & Xiong (2001) and Xiong (2001)). providing liquidity in asset markets.”
A Tale of Two Premiums: The Role of Hedgers and Speculators in Commodity Futures Markets (2019, background): “See also Gorton, Hayashi, and Rouwenhorst (2013) who show that the monthly correlation between returns and hedging pressure is contemporaneous, but not predictive.”
The Bond/Old-Bond Spread (2002, unknown): “hedge funds) become capital constrained (see for example, Shleifer and Vishny, 1997; Xiong, 2001; Yuan, 1999).”
Stock Market Declines and Liquidity (2010, unknown): “B. Industry Spillover Effects Virtually all the theoretical models, including Kyle and Xiong (2001), Gromb and Vayanos (2002), Brunnermeier and Pedersen (2007) and Garnealu and Pedersen (2007), suggest a contagion in illiquidity.”
Amplification Mechanisms in Liquidity Crises (2009, background): “Kyle and Xiong (2001) is representative of this work.”
Statistical arbitrage pairs trading strategies: Review and outlook (2017, unknown): “In line with the numerical findings of Xiong (2001), Jurek and Yang analytically identify the boundaries of a ”stabilization region”, in which the arbitrageur trades against divergences of the spread.”
Intermediary Asset Pricing: New Evidence from Many Asset Classes (2017, background): “A non-exhaustive list of this theory includes Allen and Gale (1994), Basak and Cuoco (1998), Gromb and Vayanos (2002), Xiong (2001), Kyle and Xiong (2001), Vayanos (2004), Pavlova and Rigobon (2007)„ Brunnermeier and Pedersen (2009), Duffie (2010), Adrian and Shin (2010), Garleanu and Pederson…”
Intermediary Asset Pricing (2013, methodology): “In Kyle and Xiong ( 2001 ) , the log utility assumption delivers a risk premium that is a much smoother function of arbitrageur wealth.”
Market liquidity and funding liquidity (2009, background): “The loss spiral is related to the multipliers that arise in Grossman (1988); Kiyotaki and Moore (1997); Shleifer and Vishny (1997); Chowdhry and Nanda (1998); Xiong (2001) ; Kyle and Xiong (2001); Gromb and Vayanos (2002); Morris and Shin (2004); Plantin, Sapra, and Shin (2005); and others.”
Bubbles, Financial Crises, and Systemic Risk (2012, unknown): “For example, in Xiong (2001) expert arbitrageurs that can trade in a potentially mispriced asset have log utility , such that their absolute risk aversion decreases with net worth.”
Asymmetric Price Movements and Borrowing Constraints: A Rational Expectations Equilibrium Model of Crises, Contagion, and Confusion (2005, background): “I thank my advisors Paul Krugman, Jeremy Stein, and Jiang Wang, as well as Dimitri Vayanos, Mark Aguiar, Kobi Braude, Maciej K. Dudek, Denis Gromb, Guido Lorenzoni, Stewart C. Meyers, Markus M. Möbius, Whitney Newey, Emre Ozdenoren, Steve Ross, and Jay Yuan; an anonymous referee; the editor, Rick…”
Overconfidence and Speculative Bubbles (2003, unknown): “See also Xiong (2001), Kyle and Xiong (2001), and Gromb and Vayanos (2002) for studies linking the dynamics of arbitrageurs’ capital with asset price dynamics.”
A Model of Capital and Crises (2012, background): “Both Xiong (2001) and Kyle and Xiong (2001) papers model a capital e¤ect for asset prices and show that this e¤ect can help to explain some of the crises regularities we have noted.”