Bruno Biais

Bio: Bruno Biais is an academic researcher from HEC Paris. The author has contributed to research in topics: Market liquidity & Order (exchange). The author has an hindex of 41, co-authored 144 publications receiving 8936 citations. Previous affiliations of Bruno Biais include University of Toulouse & Economic Policy Institute.

An Empirical Analysis of the Limit Order Book and the Order Flow in the Paris Bourse

Abstract: As a centralized, computerized, limit order market, the Paris Bourse is particularly appropriate for studying the interaction between the order book and order flow. Descriptive methods capture the richness of the data and distinctive aspects of the market structure. Order flow is concentrated near the quote, while the depth of the book is somewhat larger at nearby valuations. We analyze the supply and demand of liquidity. For example, thin books elicit orders and thick books result in trades. To gain price and time priority, investors quickly place orders within the quotes when the depth at the quotes or the spread is large. Consistent with information effects, downward (upward) shifts in both bid and ask quotes occur after large sales (purchases). MANY OF THE WORLD'S major stock exchanges, such as the New York and Tokyo Stock Exchanges, rely at least partially upon limit orders for the provision of liquidity. Therefore, it is important to understand the placement of limit orders and their contribution to liquidity and price formation. There is a complex relationship between investor order strategies and the short-term dynamics of asset prices, the transmission of information in security markets, the costliness of trading, and the nature of the liquidity available from the market. We are interested in understanding the intertwined dynamics of the order flow and order book: how the order flow reacts to the state of the order book and informational events in the marketplace, mechanically updates the

Trade Credit and Credit Rationing

Abstract: Asymmetric information between banks and firms can preclude financing of valuable projects. Trade credit alleviates this problem by incorporating in the lending relation the private information held by suppliers about their customers. Incentive compatibility conditions prevent collusion between two of the agents (e.g., the buyer and the seller) against the third (e.g., the bank). Consistent with the empirical findings of Petersen and Rajan (1995), firms without relationships with banks resort more to trade credit, and sellers with greater ability to generate cash lows provide more trade credit. Finally, small firms react to monetary contractions by using trade credit, consistent with the empirical results of Nilsen (1994). Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Judgemental Overconfidence, Self-Monitoring, and Trading Performance in an Experimental Financial Market

Abstract: We measure the degree of overconfidence in judgment (in the form of miscalibration, i.e., the tendency to overestimate the precision of one’s information) and self-monitoring (a form of attentiveness to social cues) of 245 participants and also observe their behaviour in an experimental financial market under asymmetric information. Miscalibrated traders, underestimating the conditional uncertainty about the asset value, are expected to be especially vulnerable to the winner’s curse. High self-monitors are expected to behave strategically and achieve superior results. Our empirical results show that miscalibration reduces and self-monitoring enhances trading performance. The effect of the psychological variables is strong for men but non-existent for women.

Competing mechanisms in a common value environment

Abstract: Consider strategic risk-neutral traders competing in schedules to supply liquidity to a risk-averse agent who is privately informed about the value of the asset and his hedging needs. Imperfect competition in this common value environment is analyzed as a multi-principal game in which liquidity suppliers offer trading mechanisms in a decentralized way. Each liquidity supplier behaves as a monopolist facing a residual demand curve resulting from the maximizing behavior of the informed agent and the trading mechanisms offered by his competitors. There exists a unique equilibrium in convex schedules. It is symmetric and differentiable and exhibits typical features of market-power: Equilibrium trading volume is lower than ex ante efficiency would require. Liquidity suppliers charge positive mark-ups and make positive expected profits, but these profits decrease with the number of competitors. In the limit, as this number goes to infinity, ask (resp. bid) prices converge towards the upper (resp. lower) tail expectations obtained in Glosten (1994) and expected profits are zero.

Convergence of Probability Measures

Abstract: Convergence of Probability Measures. By P. Billingsley. Chichester, Sussex, Wiley, 1968. xii, 253 p. 9 1/4“. 117s.

The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle

Abstract: This article examines the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small business finance, and how capital structure varies with firm size and age. The interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment. We also analyze a number of research and policy issues, review the literature, and suggest topics for future research.

A Review of IPO Activity, Pricing, and Allocations

Abstract: We review the theory and evidence on IPO activity: why firms go public, why they reward first-day investors with considerable underpricing, and how IPOs perform in the long run. Our perspective is threefold: First, we believe that many IPO phenomena are not stationary. Second, we believe research into share allocation issues is the most promising area of research in IPOs at the moment. Third, we argue that asymmetric information is not the primary driver of many IPO phenomena. Instead, we believe future progress in the literature will come from nonrational and agency conf lict explanations. We describe some promising such alternatives. From 1980 to 2001, the number of companies going public in the United States exceeded one per business day. The number of initial public offerings ~IPOs! has varied from year to year, however, with some years seeing fewer than 100 IPOs, and others seeing more than 400. These IPOs raised $488 billion ~in 2001 dollars! in gross proceeds, an average of $78 million per deal. At the end of the first day of trading, their shares traded on average at 18.8 percent above the price at which the company sold them. For an investor buying shares at the first-day closing price and holding them for three years, IPOs returned 22.6 percent. Still, over three years, the average IPO underperformed the CRSP value-weighted market index by 23.4 percent and underperformed seasoned companies with the same market capitalization and book-to-market ratio by 5.1 percent. In a nutshell, these numbers summarize the patterns in issuing activity, underpricing, and long-run underperformance, which have been the focus of a large theoretical and empirical literature. We survey this literature, focusing on recent papers. Space constraints force us to take a U.S.-centric point of view and to omit a description of the institutional aspects of going public. The interested reader can consult Ellis, Michaely, and O’Hara ~2000!,

A more complete conceptual framework for SME finance

Abstract: We propose a more complete conceptual framework for analysis of SME credit availability issues. In this framework, lending technologies are the key conduit through which government policies and national financial structures affect credit availability. We emphasize a causal chain from policy to financial structures, which affect the feasibility and profitability of different lending technologies. These technologies, in turn, have important effects on SME credit availability. Financial structures include the presence of different financial institution types and the conditions under which they operate. Lending technologies include several transactions technologies plus relationship lending. We argue that the framework implicit in most of the literature is oversimplified, neglects key elements of the chain, and often yields misleading conclusions. A common oversimplification is the treatment of transactions technologies as a homogeneous group, unsuitable for serving informationally opaque SMEs, and a frequent misleading conclusion is that large institutions are disadvantaged in lending to opaque SMEs.