Pre-Auction Inventory and Bidding BehaviorAn Analysis of Canadian Treasury Auctions
38 Pages Posted: 30 Sep 2014
Date Written: August 2014
Abstract
Many bidders enter the Government of Canada securities auctions with short or long pre-auction inventory. We find that bidding strategies and auction performance vary with pre-auction ownership structure. Short and long bidders bid higher average prices and demand larger quantities than do bidders with neutral pre-auction inventory. The effects of pre-auction ownership on bidder behavior vary with the auction cycle and with uncertainty. We argue that post-auction short squeeze does not explain the observed relation between securities prices and ownership structure.
Keywords: discriminatory auction, market power, ownership distribution, short squeeze, when-issued market
JEL Classification: D44, G10
Suggested Citation: Suggested Citation