Tom Meling

Papers:

Anonymous Trading in Equities. Journal of Finance, April 2021.

Abstract: In this paper, I explore a reform at the Oslo Stock Exchange to assess the causal effect of posttrade trader anonymity on stock liquidity and trading volume. Using a regression discontinuity approach, I find that anonymity leads to a reduction in bid-ask spreads of 40% and an increase in trading volume of more than 50%. The increase in trading volume is accounted for largely by increased trading activity by institutional investors, while retail investors do not adjust their trading behavior in response to anonymity. The results suggest that posttrade anonymity positively affects standard measures of market quality.

In the news: Finansavisen (In Norwegian. Summary: In line with the findings of my paper, the OSE recently introduced full trader anonymity in all order books.)

Do Temporary Demand Shocks Have Long-term Effects for Startups? With Hans Hvide. Review of Financial Studies, January 2023.

Abstract: Using procurement auctions and register data, we find that temporary demand shocks have long-term effects on startup outcomes. Startups that win a procurement auction are more than 20% larger in terms of sales and employment than startups that narrowly lose an auction, even several years after the contract work has ended. The effects are unique to startups and economically large; about 50% of the contract value is transmitted into long run sales. The analysis suggests learning-by-doing from contract work as a plausible mechanism. Overall, our results point to the importance of path dependence in shaping the long-term outcomes of startups.

In the news: VoxEU column, forskning.no.

Tick Size Wars: The Market Quality Effects of Pricing Grid Competition. With Sean Foley and Bernt Arne Ødegaard. Review of Finance, March 2023.

Abstract: We explore the effects of a "tick size war" where European exchanges competed directly on the minimum pricing increment in the limit order book, the tick size. We find that exchanges that reduced their tick size immediately captured market shares of quoted and executed volume from exchanges that kept their ticks large. Tick size competition improves market quality, reduces trading costs and increases aggregate depth and volume. These improvements are strongest in stocks where the spread was constrained to one tick, where liquidity providers use the finer pricing grid to engage in price competition.

In the news: Best Execution.

Broadband Internet and the Stock Market Investments of Individual Investors. With Hans Hvide, Magne Mogstad, and Ola Vestad. Forthcoming, Journal of Finance.

Abstract: We study the effects of broadband internet use on the portfolio selection of individual investors. A public program in Norway provides plausibly exogenous variation in internet use. Our instrumental variables estimates show that internet use causes a substantial increase in stock market participation, driven primarily by increased fund ownership. Existing investors increase the fraction of their portfolios held in funds and do not increase their trading activity in stocks. Access to fast internet seems to induce individual investors to make better financial decisions and hence leads to a "democratization of finance".

In the news: VoxEU column, forskning.no, BFI Insights, Dagens Naeringsliv.

New Technology and Business Dynamics. With Hans Hvide.

Abstract:  We examine business dynamics following a natural experiment: The staggered roll-out of a new technology, broadband internet, throughout Norway. The new technology led to a large, 20% increase in startup rates. Quality measures for these startups did not decline. In contrast, we do not find effects on the employment or assets of established firms. Applications to literatures on business dynamics, entrepreneurship, and technology adoption are discussed. Overall, our findings support ideas from Schumpeter (1934) and Arrow (1962) that startups play an important role in adapting the economy to new technology.

Selected work in progress:

Why Do Larger Firms Have Lower Labor Shares? With Lancelot Henry de Frahan and Thibaut Lamadon.

Preliminary abstract: We use population panel data on firms and workers in Norway to estimate how a firm's output, use of input factors, and payment to labor change in response to exogenous changes in revenues due to shifts in its product demand or productivity. These estimates allow us to draw causal inferences about how firms change the way they produce as they grow and why larger firms have lower labor shares. We develop and estimate a model to quantify the relative importance of three sources for variation in labor shares across firms: i) the shape of the labor supply curve facing the firm, ii) differences in the returns to scale between labor and other inputs, and iii) heterogeneity across firms in the output elasticities of input factors. We employ instrument variable strategies to isolate plausibly exogenous sources of variation in the revenues of firms. We compare these instrumental variable estimates to OLS estimates and document the biases that arise when using cross-sectional data to draw conclusions about how firms grow and why larger firms have lower labor shares.

Individual Crypto Investors.  With Magne Mogstad and Arnstein Vestre.

Preliminary abstract: TBA. 

Other writings:

Startups and the long-run importance of luck: New evidence. 

Ukritisk selvevaluering av innovasjonsstøtte.

Skal en etatsleder advare mot debatt og sette merkelapp på kritikere?

Tick sizes in illiquid order books.