Workshop Series: Vladimir Atanasov
We use new TRACE data to investigate the liquidity and pricing of agency mortgage-backed pass-through securities. We distinguish between two trading channels -- a To-Be-Announced (TBA) forward delivery market and a specified-pool market. Institutional specified-pool traders in the deep end of the market have easy access to the TBA market. In comparison, retail specified-pool traders in the shallow end of the market have virtually no access to the TBA channel. We first confirm that only large specified-pool transactions show strong integration with the TBA market in terms of settlement dates and prices. We then show that easy TBA access for traders in the deep end translates into abundant liquidity with balanced two-way trade flow and realized bid-ask spreads of less than 0.1%. In contrast, retail traders who do not benefit from integration with the TBA market suffer 4-to-1 sell-to-buy trade flow imbalance and 0.5% to 1% realized bid-ask spreads. Because trading in the same security can occur in both the shallow and deep ends of the market, we can precisely estimate the price discounts due to illiquidity by comparing the prices of small and large-sized trades. All of our empirical tests paint a consistent picture that illiquidity in the shallow end causes 2% to 5% discounts.
Vladimir Atanasov is an associate professor at the Mason School of Business, College of William and Mary. He finished his Ph.D. in finance at the Pennsylvania State University in 2002. Professor Atanasov teaches the Financial Markets Career Acceleration Module and Portfolio Management in the full-time MBA program, Money and Debt Markets, Financial Management, and a "Distinguish" Advanced Portfolio Management class in the undergraduate program. Before coming to William and Mary, Vladimir Atanasov was an assistant professor at Babson College where he taught Security Valuation and Investments. He also taught Introductory Corporate Finance and Investments to undergraduates at Penn State, and Private Equity and Mergers and Acquisitions classes to M. Sc. Students at Toulouse Business School. His research is primarily focused on corporate governance and specifically on the effect of controlling blockholders on firm value. He is also studying the effect of securities and corporate laws on the behavior of large investors and the relationship between certain legal statutes and capital market development. Other research projects that Professor Atanasov works on include the dilution of entrepreneurs in VC-backed firms and the effect of lawsuits on VC funding and deal flow. His research has been published in the Journal of Financial Economics, Journal of Financial and Quantitative Analysis, and Journal of Corporation Law, and funded by several grants from the U.S. Department of State, the Kauffman Foundation, and the Melbourne Center for Financial Studies. Vladimir Atanasov has consulted private equity funds, investment companies, and financial advisors in Eastern Europe on equity valuation, private equity investment contracts, portfolio management, asset allocation, and development of investment products.