Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 5, 2020 erstellt
Beschreibung:
Are dealers' search efforts endogenous in decentralized markets? How do dealers' search efforts affect market efficiency? We propose a model with dealers choosing idiosyncratic search intensities, and estimate the model using transaction data on U.S. corporate bonds. We find that: [1] with dealers ranked by their private valuations for a bond, the middle-type dealer chooses the highest search intensity, and she reallocates bond positions from lower-type dealers to higher-type dealers; [2] the estimated model predicts that the search costs and bond mis-allocation in current OTC markets generate 13.7% welfare loss relative to a counterfactual friction-less market