"Time Series Reversal: An End-of-the-Month Perspective" (JMP) [Latest Version] [SSRN]
Abstract: This paper introduces a novel aggregate reversal strategy that exploits monthly calendar effects. Specifically, I show that the end-of-the-month return of the S&P500 negatively correlates with one-month ahead returns. Contrary to the cross-sectional findings, strategies based on the novel aggregate pattern are extremely cost-effective, easy to implement, cyclical, and do not require short-selling. This novel pattern is consistent with pension funds’ liquidity trading to meet pension payment obligations.
Presentations: SFI Lugano PH.D. Brown Bag, HEC Paris PH.D. Brown Bag, 30th Finance Forum (Ph.D. Session), CIVICA Doctoral Conference 2023, EFMA 2024, 40th AFFI Conference (Ph.D. Session), 16th Annual SoFiE Meeting, 2024 FMA (Ph.D. Session), 8th HEC Paris PhD Workshop, 2024 PhD Workshop on the Future of Financial Intermediation (2024, Poster), 2024 Nova Finance PhD Final Countdown, Oxford-MAN Financial Economics Workshop 2024, AFA (2025, PhD Poster), International Finance Society (Poster), 32th Finance Forum
Awards: 40th AFFI Best PHD Workshop Paper Award, International Finance Society Best Poster Award
Media Coverage: Harbourfront Technologies
Video Presentation: Oxford-MAN 'Financial Economics and Microstructure' workshop
"Optimal Tick Size" [Latest Version] [SSRN]
joint with Barbara Rindi (Bocconi University) and Bart Zhou Yueshen (SMU Singapore)
Abstract: We use a limit order book model to determine the optimal tick size that maximizes market participant welfare.
When investors arrive sequentially with no competition in liquidity provision, a zero tick size can be optimal. However, when investors can supply liquidity by either undercutting or queuing behind existing orders, the optimal tick size becomes a positive function of the asset’s value and a negative function of trading activity. In assessing changes in tick size, we find that quoted spread is the most effective proxy for total welfare. Our findings suggest that both the European tick size regime and, to a degree, the SEC’s 2022 proposal dominate Reg. NMS Rule 612.
Presentations (* by Coauthor): SSE Finance Brown Bag*, HEC Paris Finance Brown Bag, EFA 2023 (Poster), CFM-Imperial Market Microstructure Workshop 2023*, First QRFE Workshop 2024*
"Manipulation-Free Trading Mechanisms: Auction Design Approach" [Draft available upon request]
joint with Stefano Lovo (HEC Paris) and Barbara Rindi (Bocconi University)
Abstract: This paper proposes new financial market mechanisms through an auction design approach. We first introduce a simultaneous mechanism as an alternative to dark pools. This mechanism endogenously separates buyers from sellers, avoiding the transparency and manipulation issues inherent in traditional dark pools. Next, we study efficient mechanisms under information uncertainty and learning. We propose a sequential trading mechanism that progressively announces signals, effectively overcoming the issues of manipulation and speed races associated with standard Limit Order Books.
Presentations (* by Coauthor): HEC PARIS Finance Brown Bag*