IMF Working Papers Volume 2005 Issue 157: Bidder Participation and Information in Currency Auctions (2005)

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Bidder Participation and Information in Currency Auctions

Author:

Rafael Romeu

Rafael Romeunull

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Lawrence Ausubel

Lawrence Ausubelnull

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Series:: IMF Working Papers

Volume/Issue:: Volume 2005: Issue 157

Language:: English

Publication Date:: 01 Aug 2005

DOI:: https://doi.org/10.5089/9781451861761.001

ISBN:: 9781451861761

ISSN:: 1018-5941

Pages:: 46

Keywords:: WP; Inventory dev.; standard deviation; U.S. dollar; Lag Inv. dev.; Auctions; currency auctions; pay-as-bid auctions; asymmetric information; bank sophistication; market share; order flow effect; sophistication measure; lag Inv. Dev; number of bidder; descriptive statistics; bidding strategy; Currency markets; Currencies; Exchange rates; Securities markets; Emerging and frontier financial markets

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Series:: IMF Working Papers

Volume/Issue:: Volume 2005: Issue 157

Language:: English

Publication Date:: 01 Aug 2005

DOI:: https://doi.org/10.5089/9781451861761.001

ISBN:: 9781451861761

ISSN:: 1018-5941

Pages:: 46

Keywords:: WP; Inventory dev.; standard deviation; U.S. dollar; Lag Inv. dev.; Auctions; currency auctions; pay-as-bid auctions; asymmetric information; bank sophistication; market share; order flow effect; sophistication measure; lag Inv. Dev; number of bidder; descriptive statistics; bidding strategy; Currency markets; Currencies; Exchange rates; Securities markets; Emerging and frontier financial markets

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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This paper studies the participation and performance of sophisticated versus unsophisticated auction participants in an environment with numerous bidders, uncertainty, and asymmetric information. We examine multi-unit, pay-as-bid, currency auctions conducted by the Central Bank of Venezuela. We find that sophisticated bidders outperform their less sophisticated rivals during periods of high volatility, apparently as a result of their superior informationgathering ability. The result is consistent across both quantity (sophisticated bidders win more market share) and price (sophisticated bidders pay lower premiums). The result is consistent with the view that a pay-as-bid auction format may be detrimental to participation by less-informed bidders.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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