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Working Paper
An Empirical Test of Auction Efficiency: Evidence from MBS Auctions of the Federal Reserve
Auction theory has ambiguous implications regarding the relative efficiency of three formats of multiunit auctions: uniform-price, discriminatory-price, and Vickrey auctions. We empirically evaluate the performance of these three auction formats using the bid-level data of the Federal Reserve's purchase auctions of agency mortgage-backed securities (MBS) from June 1, 2014 through November 17, 2014. We estimate marginal cost curves for all dealers, at each auction, based on structural models of the multiunit discriminatory-price auction. Our preliminary results suggest that neither ...
Working Paper
QE Auctions of Treasury Bonds
The Federal Reserve (Fed) uses a unique auction mechanism to purchase U.S. Treasury securities in implementing its quantitative easing (QE) policy. In this paper, we study the outcomes of QE auctions and participating dealers' bidding behaviors from November 2010 to September 2011, during which the Fed purchased $780 billion Treasury securities. Our data include the transaction prices and quantities of each traded bond in each auction, as well as dealers' identities. We find that: (1) In QE auctions the Fed tends to exclude bonds that are liquid and on special, but among included bonds, ...