Xiaoqi (Catherine) Xu
Working Papers
1. "Alternative Trading System Effects on Market Efficiency and Real Efficiency," with Chong Huang
*Alternative trading systems (ATS) may lead to asymmetric investor trading venue choices, asymmetric firm choices, and asymmetric limits to arbitrage. In some cases, ATSs improve both exchange market efficiency and real efficiency, and in other cases, ATSs harm exchange market efficiency but surprisingly promote real efficiency.
2. "Informed Trading and Product Market Competition," with Chong Huang
*This paper examines the interplay between financial market trading and product market competition. An entrant learns about product demand from trading volume in incumbent firm’s stock market before his entry decision. Without initial stake in incumbent firm, an informed investor trades on his private information. With an initial stake, if product demand is high, the probability of informed investor purchasing extra shares decreases from one to zero and then jumps back to one as entry cost increases. Initial stake increases (decreases) entry probability at relatively small (large) entry costs. A minimal trading cost in stock market promotes product market competition.
3. "Dark Pool Effects on Investor Trading Venue Choice."
*This paper studies the dark pool effects on investor trading venue choice in a model featuring managerial learning from the exchange market. The dark pool does not divert investors away from the exchange market but initiates investors’ coordination incentive when trading in the exchange market does not bring them positive profits. The informed investor goes to the dark pool for making positive profits, and the liquidity investor goes to the dark pool for cost-saving. When the transaction cost in the exchange marketis high enough, the informed investor does not trade in the exchange market, regardless of the liquidity investor’s trading behavior. When the delay cost of the liquidity investor is higher than the transaction cost, the liquidity investor may trade in the exchange market, regardless of the informed investor’s trading behavior. In addition, managerial learning may encourage more informed trading in the exchange market when the transaction cost is low enough.