April 1, 2017 at 7:00 pm

Economics Seminar | Market Microstructure and Cross-section of Systematic Volatility, April 21

Dr. Yashar Heydari Barardehi

Dr. Yashar Heydari Barardehi

The Economics Seminar series presents Dr. Yashar Heydari Barardehi discussing “Market microstructure and the cross-section of systematic volatility” on April 21 at 3 p.m. in Bentley Annex 302.

Barardehi is Assistant Professor of Economics at Ohio University.

Abstract: We investigate the relationships between systematic risk factors and trade-time return volatilities in high frequency markets, and how they vary with market conditions. We first document that risk factor loadings and firm characteristics—historically identified to explain the cross-section of first moments of stock returns at low frequencies—also systematically explain the cross-section of high frequency normalized trade-time return volatilities, and that factor loadings and characteristics tend to be more positively associated with normalized trade-time return volatilities in more active markets. We use the normalized trade-time return volatilities to construct a test of the market microstructure invariance hypothesis that does not require observations of primitive trading decisions. We uncover systematic violations of invariance that rise when the activity levels of market conditions being compared differ by more. We close the loop of our analysis by showing that the magnitudes of deviations from invariance are well-explained by systematic risk.

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