International order flows: Explaining equity and exchange rate returns

Macroeconomic models of equity and exchange rate returns perform poorly at high frequencies. The proportion of daily returns that these models explain is essentially zero. Instead of relying on macroeconomic determinants, we model equity price and exchange rate behavior based on a concept from microstructure – order flow. The international order flows are derived from belief changes of different investor groups in a two-country setting. We obtain a structural relationship between equity returns, exchange rate returns and their relationship to home and foreign equity market order flow. To test the model we construct daily aggregate order flow data from 800 million equity trades in the U.S. and France from 1999 to 2003. Almost 60% of the daily returns in the S&P100 index are explained jointly by exchange rate returns and aggregate order flows in both markets. As predicted by the model, daily exchange rate returns and order flow into the French market have significant incremental explanatory power for the daily S&P returns. The model implications are also validated for intraday returns.

Technology and the architecture of markets: re-configuring the Canadian equity market

This paper examines the relation between technical possibilities, liberal logics, and the concrete reconfiguration of markets. It focuses on the enrolling of innovations in communication and information technologies into the markets traditionally dominated by stock exchanges. With the development of capacities to trade on-screen, the power of incumbent market makers has been challenged as a less stable array of competing quasi-public and private marketplaces emerges. Developing a case study of the Toronto Stock Exchange, I argue that narrative emphasis on the performative power of sociotechnical innovations, the deterritorialisation of financial relations, and the erosion of state capacities needs qualification. A case is made for the importance of developing an understanding of: the spaces of encounter between emerging social technologies and property rights, rules of exchange, and structures of governance; and the interplay of orderings of different institutional composition and spatial reach in the reconfiguration of market architectures. Only then can a better grasp be gained of the evolving dynamics between making markets, the regulatory powers of the state, and their delimitations.

K1 of Chevalley groups are nilpotent

Abstract Let F be a reduced irreducible root system and R be a commutative ring. Further, let G(F,R) be a Chevalley group of type F over R and E(F,R) be its elementary subgroup. We prove that if the rank of F is at least 2 and the Bass-Serre dimension of R is finite, then the quotient G(F,R)/E(F,R) is nilpotent by abelian. In particular, when G(F,R) is simply connected the quotient K1(F,R)=G(F,R)/E(F,R) is nilpotent. This result was previously established by Bak for the series A1 and by Hazrat for C1 and D1. As in the above papers we use the localisation-completion method of Bak, with some technical simplifications.