- Upstairs Market for Principal and Agency Trades: Analysis of Adverse Information and Price Effects
- Network Externalities, Market Quality and Trading Activity
- Recent Refereed Articles
- Bibliographies - Selected Recent Cases
- Executive MBA - Course Information Sheet
- MBA - Course Outline (Financial Markets)
- MBA Course Outline (Strategic Financial Planning)
Professor Robert White, a member of the Finance Area Group at the Ivey Business School earned a BSc (Honours) and a MBA from the University of British Columbia and PhD from M.I.T. He has published extensively in the leading finance journals, such as the Journal of Finance, Journal of Financial and Quantitative Analysis, Journal of Money Credit and Banking, Journal of Banking and Finance, Journal of Financial Intermediation, Journal of International Financial Markets, Institutions & Money and Management Science, on issues relating to the Financial Services Industry and Financial Markets. The focus of his current research is on the micro-structure of security prices. He is also a prolific case writer. Among his publications is the recent casebook, Case Studies in Modern Corporate Finance. He created and teaches one of the most popular elective courses, Financial Markets (Strategic Financial Planning), at the Ivey Business School.
- PhD, Massachusetts Institute of Technology
- MBA, UBC
- BSc, UBC
Recent Refereed Articles
Turnbull, D. A. .. S.; White, R. W.; Smith, B. F.,
2010, "In Search of Liquidity: The Block Broker's Choice of where to Trade Cross-listed Stocks", Journal of Economics and Business, January 62(1): 20 - 34.
Abstract: This paper investigates how block brokers choose the exchange on which to fill orders for cross-listed securities. We model the block broker's response function based on several variables used to measure differences in the displayed and non-displayed liquidity between markets. Because a block broker's reputation in each market affects the liquidity available to him, we consider the role of reputation in the decision process. We find that reputation capital is significant and that it differs between the New York Stock Exchange and The Toronto Stock Exchange. In addition to reputation capital, the choice of where to fill a block order for cross-listed shares is a function of market depth, price continuity and clientele effects.
Smith, B. F.; Turnbull, D. A. .. S.; White, R. W.,
2006, "The Impact of Pennies on the Market Quality of The Toronto Stock Exchange", Financial Review, The, May 41(2): 273 - .
Abstract: Using detailed order flow data from The Toronto Stock Exchange, this paper finds no evidence that a smaller tick size lessens market liquidity for either small or large traders. Rather, there is evidence of lower trading costs, faster time to order execution, and greater price continuity. Consistent with a penny tick allowing a finer pricing grid search, there is an increase in the number of Change Former Orders and cancellations.
Smith, B. F.; Alasdair, S. T.; White, R. W.,
2001, "Upstairs Market for Principal and Agency Trades: Analysis of Adverse Information and Price Effects", Journal of Finance, January 56(5): 1723 - 1746.
Abstract: This paper directly tests the hypothesis that upstairs intermediation lowers adverse selection cost. We find upstairs market makers effectively screen out information-motivated orders and execute large liquidity-motivated orders at a lower cost than the downstairs market. Upstairs markets do not cannibalize or free ride off the downstairs market. In one-quarter of the trades, the upstairs market offers price improvement over the limit orders available in the consolidated limit order book. Trades are more likely to be executed upstairs at times when liquidity is lower in the downstairs market.
Griffiths, M. D.; Smith, B.; Turnbull, D. A. .. S.; White, R. W.,
2000, "The Costs and Determinants of Order Aggressiveness", Journal of Financial Economics, January 56(1): 65 - 88.
Abstract: This paper examines the costs and determinants of order aggressiveness. Aggressive orders have larger price impacts but smaller opportunity costs than passive orders. Price impacts are amplified by large orders, small firms, and volatile stock prices. To minimize the implementation shortfall, the optimal strategy is to enter buy (sell) orders at the bid (ask). Aggressive buy (Sell) orders the to follow other aggressive buy (sell0 orders and occur when bid-ask spreads are narrow and depth on the same (opposite) side of the limit book is large (small). Aggressive buys are more likely than sells to be motivated by information.
Griffiths, M. D.; Turnbull, D. A. .. S.; White, R. W.,
1999, "Re-examining the Small-Cap Myth: Problems in Portfolio Formation and Liquidation", Global Finance Journal, January 10(2): 201 - 221.
Abstract: This study investigates the realizable returns on portfolios at the turn-of-the-year. Using an intraday simulation that accounts for the volumes offered or wanted at market bid-ask prices, large-capitalization securities significantly outperform small-capitalization securities by 2.4% and 6.5%, depending on whether the portfolios were formed on the last day of the taxation year or were formed over the last month of the trading year. In no one year could the small-capitalization portfolio be completely divested by the end of the holding period, suggesting that investors are not remunerated for the illiquidity in this portfolio. Results based on returns calculated by using the mean of the bid-ask spread show that the results are not derived solely from transaction costs.
Griffiths, M. D.; Smith, B. F.; Turnbull, D. A. .. S.; White, R. W.,
1998, "The Role of Tick Size in Upstairs Trading and Downstairs Trading", Journal of Financial Intermediation, December 7(4): 393 - 417.
Abstract: This paper examines the impact of reducing the tick size on market-making behavior on The Toronto Stock Exchange. The results indicate a significant decrease in the percentage of trades of fewer than 10,000 shares involving the upstairs traders and a significant increase in the percentage of trades of fewer than 1,000 share involving the designated market makers. Consistent with this finding, the upstairs traders earn significantly lower returns on non-block trades and the designated market markers earn lower returns on trades smaller than 1,000 shares. We conclude the tick size reduction benefits the trading public.
Griffiths, M. D.; Smith, B. F.; Turnbull, D. A. .. S.; White, R. W.,
1998, "Information Flows and Open Out-Cry: Evidence of Imitation Trading", Journal of International Financial Markets, Institutions & Money, January 8(2): 101 - 116.
Abstract: We provide empirical evidence on how market making is affected by the existence of a crowd in a floor trading system based on data from the Toronto Stock Exchange which closed its trading floor in April 1997. While effective bid-ask spreads, trading volume and average trade size are unchanged with the introduction of system-only trading for floor-traded securities, there is strong evidence that given type of event (trade or quote change) occurs with greater probability following an event of the same type than it does unconditionally. We examine the three hypotheses put forward by and find sufficient evidence to reject the hypotheses of strategic order splitting and, similar but successive reaction to the same events. We are unable to reject the hypothesis of traders engaging in imitating behavior which is likely to arise when traders can better identify each other in the trading environment.
Smith, B.; White, R. W.; Robinson, M. J.; Nason, R.,
1997, "Intraday Volatility and Trading Volume After Takeover Announcements", Journal of Banking & Finance, December 21(3): 337 - 368.
Abstract: This paper examines transactions data regarding the market's reaction to 258 takeover announcements on the Toronto Stock Exchange (TSE) from 1977 to 1989. The study analyzes volatility and volume of target firm's stock during the first trading day following a takeover announcement. A cross-sectional analysis relates this intraday volatility and volume to various aspects of a takeover announcement that proxy for the certainty of payoff to shareholders. Post-announcement volatility is highest when takeover announcements involve share exchange bids which are contested. Trading volume is highest when bids are contested and involve a large initial price change.
Griffiths, M. D.; White, R. W.,
1993, "Tax-Induced Trading and the Turn of the Year Anomaly: An Intraday Study", Journal of Finance, December 48(2): 575 - 598.
Abstract: This study tests the tax-induced trading hypothesis as an explanation of the turn-of-the-year anomaly using Canadian and U.S. intraday data. Since the Canadian tax year-end precedes the calendar year-end by five business days, tax effects may be isolated. We find the anomaly is related to the degree of seller- and buyer-initiated trading and depends upon the incidence of the taxation year-end. Seller-initiated transactions (at bid prices) dominate until the tax year-end after which buyer-initiated trades (at ask prices) dominate. The anomaly is a function of bid-ask prices.
Smith, B.; White, R. W.,
1991, "The Impact of Stabilization and Interim Audits on the Pricing of Deposit Insurance", Journal of Business Finance and Accounting, January 19(1): 113 - 132.
Abstract: This paper develops a variable rate deposit insurance premium model to analyze the impact of stabilization and interim audits. The pricing model incorporates the option of the deposit insurer to stabilize rather than liquidate or merge a distressed financial institution. Empirical results based on the credit unions of British Columbia indicate that stabilization is least costly given non-trivial liquidation and merger expenses, low audit costs and low volatility of the assets to liabilities ratio. Interim audits are most beneficial for financial institutions which have the lowest audit costs, highest variance of assets to liabilities ratio, lowest liquidation or merger expenses and highest leverage.
Smith, B. F.; White, R. W.,
1990, "The Capital Market Impact of Recent Canadian Bank Failures", Canadian Journal of Administrative Sciences, January 7(2): 41 - 47.
Abstract: A pooled cross-section time series model examined shareholder reaction to the bailout of Canadian Commercial Bank and subsequent runs on deposits at it and other banks. The price of the shares of the non-failed Schedule A chartered banks fell upon announcement of the Canadian Commercial Bank bailout, while the systematic risk of banks with significant oil exposure rose. Furthermore, news of runs on deposits only affected the common stock of Canada's lower rated banks reflecting the "flight to quality" reaction of depositors.
Smith, B.; White, R. W.,
1988, "The Deposit Insurance System in Canada: Problems and Proposals for Change", Canadian Public Policy, January XIV(4): 331 - 346.
Abstract: The paper examines problems facing the Canada Deposit Insurance Corporation (CDIC) and potential solutions. The major deposit insurance system in Canada, like those in other countries, has suffered from the inability of capital markets and regulators to deal appropriately with the system created incentives for insured institutions to take excessive risks. Market and regulatory discipline will strengthen only when the implicit guarantee of depositors in large financial institutions is accounted for and more accurate and complete information about the financial condition of member institutions is revealed to capital markets and regulators. Consequently, solutions to the problems of deposit insurance system depend on how effectively procedures to enhance disclosure are implemented.
Hatch, J. E.; White, R. W.,
1986, "A Canadian Perspective on Canadian and United States Capital Market Returns: 1950-1983", Financial Analysts Journal, December 42(3): 60 - 69.
Abstract: A study was conducted of the monthly rates of return available in the Canadian capital market during the years 1950-1983 compared with characteristics of returns available to a Canadian investor in the US for the same period. The return series include equities, Treasury bills, federal bonds, and industrial bonds in both Canada and the US and Canadian municipal and provincial bonds. US return series were adjusted for monthly changes in the value of the Canadian dollar. The return series characteristics studied include: 1. range, 2. standard deviation, 3. correlation, and 4. serial correlation. The statistical characteristics of the Canadian and US return series are very similar. However, the variance of monthly equity returns was higher in Canada in the 1980s than previously this was not true of the US data. US monthly returns are not a good leading indicator of Canadian returns.
Murray, J. D.; White, R. W.,
1983, "Economies of Scale and Economies of Scope in Multiproduct Financial Institutions: A Study of British Columbia Credit Unions", Journal of Finance, December 38(3): 887 - 902.
Abstract: This paper investigates the production technology facing computerized credit unions in Canada. A full system of translog cost equations is estimated in order to test for economies of scale, economies of scope, and other production characteristics in a multiproduct context. The regression results indicate that most of the credit unions in our sample experience significant increasing returns to scale as they expand their level of output. There is also evidence of cost complementarity or economies of scope in their mortgage and other lending activities. As a result, legislation which limits the ability of credit unions to grow and diversify will likely raise the operating costs of this important group of financial institutions. Additional structural tests of the most general translog specification suggest that none of the restrictive production conditions commonly imposed by other researchers using Cobb-Douglas and CES specifications provide a valid representation of credit union technology. The results of many earlier studies are therefore open to question.
Kallberg, J. G.; White, R. W.; Ziemba, W. T.,
1982, "Short Term Financial Planning Under Uncertainty", Management Science, December 28(6): 670 - 682.
Abstract: This paper presents a stochastic linear programming formulation of a firm's short term financial planning problem. This framework allows a more realistic representation of the uncertainties fundamental to this problem than previous models. In addition, using Wets's algorithm for linear simple recourse problems, this formulation has approximately the same computational complexity as the mean approximation (i.e., the deterministic program obtained by replacing all random elements by their means). Using this formulation we empirically investigate the effects of differing distributions and penalty costs. We conclude that even with symmetric penalty costs and distributions the mean model is significantly inferior to the stochastic linear programming formulation. Thus we are able to demonstrate that ignoring the stochastic components in linear programming formulations can be very costly without having significant computational savings.