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Bidder Participation and Information in Currency Auctions
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Author/Editor: |
Ausubel, Lawrence | Romeu, Rafael |
| Authorized for Distribution: |
August 1, 2005 |
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Electronic Access: |
Free Full Text (PDF file size is 285KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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Summary: This paper studies the participation and performance of sophisticated versus unsophisticated auction participants in an environment with numerous bidders, uncertainty, and asymmetric information. We examine multi-unit, pay-as-bid, currency auctions conducted by the Central Bank of Venezuela. We find that sophisticated bidders outperform their less sophisticated rivals during periods of high volatility, apparently as a result of their superior informationgathering ability. The result is consistent across both quantity (sophisticated bidders win more market share) and price (sophisticated bidders pay lower premiums). The result is consistent with the view that a pay-as-bid auction format may be detrimental to participation by less-informed bidders.
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Series: |
Working Paper No. 05/157 |
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Subject(s): |
Currencies | Foreign exchange auctions | Venezuela, Republica Bolivariana de |
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Author's keyword(s): |
Auctions
| currency auctions
| pay-as-bid auctions
| asymmetric information
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Published: |
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August 1, 2005 |
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ISBN/ISSN: |
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1934-7073 |
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Format: |
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Paper |
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Stock No: |
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WPIEA2005157 |
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Pages: |
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46 |
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Price: |
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US$15.00
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