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Computer-based Trading, Institutional Investors and Treasury Bond Returns

Lookup NU author(s): Dr Minh Nguyen

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Abstract

This study provides a comprehensive analysis of the effects of Computer-based Trading (CBT) on expected returns of Treasury bonds. We document a strong relationship between bond expected returns and the intensity at which CBT takes place in the Treasury market. We find that investing in bonds with the largest exposure to the aggregate CBT intensity and shorting those with the smallest generates large and signifi cant returns. We show that the main findings of this study can be rationalized by institutional investors’fund f‡lows, consistent with the predictions of the theoretical model of Vayanos and Woolley (2013).


Publication metadata

Author(s): Liu X, Lo I, Nguyen M, Valente G

Publication type: Working Paper

Publication status: Published

Journal: Hong Kong Institute for Monetary Research Working Paper

Year: 2018

Pages: 1-64

Publisher: Hong Kong Institute for Monetary Research

URL: http://www.hkimr.org/uploads/publication/509/wp201820_.pdf


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