arXiv 27 Jun 2026 · Econometrics
arXiv:2606.29018 · PDF · DOI · OpenAlex · Extracted main text
We show that net demand for liquidity by algo strategies is identifiable from its trade and price history alone, with no knowledge of its signal or optimization problem. An exact multi-period regret decomposition implies that the sign of this statistic classifies a linear strategy as a net liquidity consumer or provider, recovering the Kyle (1985) informed-trader/market-maker dichotomy from observables alone. Under an AR(1) cost process, the same statistic equals the product of strategy size and the squared Roll (1984) implied spread, making the correction a direct proxy for prevailing illiquidity. Extending to endogenous price impact and aggregating across N correlated strategies yields a liquidity-balance condition whose violation produces welfare loss scaling as N squared, a closed-form fire-sale externality. We calibrate to CRSP equity data (2016-2025), tracking implied spreads through the COVID-19 and 2022 rate-shock episodes, with an estimator computable in O(Tnd) time.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Roll, Richard (1984) A Simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient Market | 1.000 | 8 | 4 | 100% |
| 2 | Kyle, Albert S (1985) Continuous Auctions and Insider Trading | 1.000 | 7 | 4 | 100% |
| 3 | Almgren, Robert and Chriss, Neil (2001) Optimal Execution of Portfolio Transactions | 0.737 | 3 | 2 | 100% |
| 4 | Ledoit, Olivier and Wolf, Michael (2004) A Well-Conditioned Estimator for Large-Dimensional Covariance Matrices | 0.737 | 3 | 2 | 100% |
| 5 | Hasbrouck, Joel (1991) Measuring the Information Content of Stock Trades | 0.644 | 2 | 2 | 100% |
| 6 | Jegadeesh, Narasimhan and Luo, Jiang and Subrahmanyam, Avanidhar and… (2025) Short-Term Reversals and Longer-Term Momentum around the World | 0.644 | 2 | 2 | 100% |
| 7 | Mamais, Panagiotis (2025) Explaining and Predicting Momentum Performance Shifts Across Time and Sectors | 0.644 | 2 | 2 | 100% |
| 8 | Nagel, Stefan (2012) Evaporating Liquidity | 0.644 | 2 | 2 | 100% |
| 9 | Glosten, Lawrence R. and Milgrom, Paul R (1985) Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders | 0.511 | 2 | 1 | 100% |
| 10 | Bai, Zhidong and Silverstein, Jack W (2010) Spectral Analysis of Large Dimensional Random Matrices | 0.405 | 1 | 1 | 100% |
Showing the top 10 of 22 scored citations.