Talis J. Putnins

• PhD
• Stockholm School of Economics in Riga

As investors shift their focus from average liquidity to liquidity risk, relying solely on average measures to claim markets are more liquid can be misleading. We document that as the mean of bid ask spreads decreased over recent decades, their skewness increased. To understand why this has occurred, we examine how two key features of modern market...

The aim of the SSE Riga Shadow Economy Index for the Baltic countries is to measure the size of the shadow economies in Estonia, Latvia and Lithuania, as well as to explore the main factors that influence participation in the shadow economy. We use the term “shadow economy” to refer to all legal production of goods and services that is deliberately...

Atomic settlement involves the conditional exchange of two assets. We model securities settlement in permissionless and permissioned blockchains and apply it to traditional financial markets. We find that a permissionless blockchain is optimal for US equities and foreign exchange, and a permissioned blockchain is optimal for US corporate bonds and...

Market manipulation distorts financial market prices, but does that matter for listed companies? We show that it does. Increased manipulation makes stock price signals less useful for corporate managers, thereby decreasing the quality of real investment decisions by companies. Consequently, firm operating performance decreases. Our results highligh...

Decentralized exchanges (DEXs) are gaining popularity, allowing investors to trade cryptocurrencies through liquidity pools. We find that about 44% of major DEX liquidity pools are scams, resulting in approximately $1.5 billion in investor losses. Scammers display specific traits, including limited token interactions, multiple pool creation, failur...

Public blockchains have given rise to a new type of scam known as a "rug pull". We find these scams are pervasive: 44% of tokens in major decentralized exchanges (DEXs) are scams, causing losses of $1.5 billion to investors. We show that scams differ from legitimate tokens in key characteristics, including the token creators launch multiple liquidi...

Using data from over one million financial advisers in the U.S., we estimate that up to 30% of advisers are involved in misconduct, but only about one-third of these cases are reported by regulators. Advisers with a high propensity for misconduct oversee approximately 6.9 trillion assets under management (AUM). The rates of adviser misconduct and u...

The aim of the SSE Riga Shadow Economy Index for the Baltic countries is to measure the size of the shadow economies in Estonia, Latvia and Lithuania, as well as to explore the main factors that influence participation in the shadow economy. We use the term “shadow economy” to refer to all legal production of goods and services that is deliberately...

How does a market learn about the number of informed traders and thus adverse selection risk? We show that trade sequences convey information about adverse selection risk. Consequently, buy/sell order imbalances can destabilize markets, triggering extreme price movements, flash crashes, and liquidity evaporation. The increasing prevalence of these...

The US Federal Reserve doubled its balance sheet during the COVID-19 pandemic in the most aggressive unconventional monetary policy on record. I show that the scale and scope of these actions substantially impacted stock markets, explaining at least one-third of their rebound. The impact occurs predominantly through bond yields (discount rates) and...

In order to strengthen labour market resilience, it helps to focus on different kinds of labour market patterns. This enables new information to be obtained on resilient policies and practices that work. This chapter takes the view that labour market resilience is the result of entrepreneurial practices. Thus, an emphasis on understanding the main...

We investigate the new reality of exchange-traded funds (ETFs). We show that most ETFs are active investments in form (designed to generate alpha) or function (serve as building blocks of active portfolios). We define a new activeness index to capture these dimensions, finding that the cross-section of ETFs is now increasingly characterized by high...

https://www.sseriga.edu/shadow-economy-index-baltic-countries The aim of the SSE Riga Shadow Economy Index for the Baltic countries is to measure the size of the shadow economies in Estonia, Latvia and Lithuania, as well as to explore the main factors that influence participation in the shadow economy. We use the term “shadow economy” to refer to...

This Appendix accompanies the paper “Why does entrepreneurial orientation affect company performance?”. It reports the findings from a systematic review of existing studies that analyze the relationship between entrepreneurial orientation (EO) and company performance, as well as provides some further robustness tests of the potential non-response b...

The aim of the SSE Riga Shadow Economy Index for the Baltic countries is to measure the size of the shadow economies in Estonia, Latvia and Lithuania, as well as to explore the main factors that influence participation in the shadow economy. We use the term “shadow economy” to refer to all legal production of goods and services that is deliberately...

We apply a new method to measuring the shadow economy in Russia during the period 2017-2018 and provide evidence on the main factors that influence involvement in the shadow economy. Drawing on methodology developed by Putnins and Sauka (2015), we estimate that the size of the shadow economy in Russia is 44.7% of GDP in 2018. This is similar to the...

В настоящем отчете проанализирована динамика развития теневой экономики в России в период с 2017 по 2018 год, а также приводятся данные об основных факторах, влияющих на участие предпринимателей в теневой экономике. При составлении Индекса теневой экономики в основу исследования легла методология, разработанная Путниньшем & Саукой (Putnins & Sauka,...

Using new empirical measures of information leadership, we find that the role of options in price discovery is up to five times larger than previously thought. Approximately one-quarter of new information is reflected in options prices before being transmitted to stock prices, with options playing a more important role in price discovery around inf...

This report analyses the dynamics of the shadow economy in Russia during the period 2017-2018 and provides evidence on the main factors that influence entrepreneurs' involvement in the shadow economy. The Shadow Economy Index draws on methodology developed by Putnins and Sauka (2015) using information from entrepreneurs. It combines business income...

Using the staggered entry of Chi-X in 12 European equity markets as a source of exogenous variation in high frequency trading (HFT), we find that HFT causes significant increases in comovement in returns and in liquidity. About one-third of the increase in return comovement is due to faster diffusion of market-wide information. We attribute the rem...

Research summary To better understand why entrepreneurial orientation (EO) is positively associated with company performance, we propose and test a reconceptualization of how the components of EO (risk‐taking, innovativeness, proactiveness) combine in driving performance. Drawing on financial economics theory, our conceptualization highlights that...

This Appendix accompanies the paper by Putniņš T.J. and Sauka A. (2019) Why does entrepreneurial orientation affect company performance? Strategic Entrepreneurship Journal. 1–25. https://doi.org/10.1002/sej.1325 It reports the findings from a systematic review of existing studies that analyze the relationship between entrepreneurial orientation (EO...

The SSE Riga Shadow Economy Index is determined annually based on the methodology developed by Putniņš and Sauka (2015) and using Business surveys in Baltic countries. Several surveying and data collection techniques are used in surveys, which have been shown to be effective in eliciting relatively truthful responses. In order to calculate the size...

Cryptocurrencies are among the largest unregulated markets in the world. We find that approximately one-quarter of bitcoin users are involved in illegal activity. We estimate that around $76 billion of illegal activity per year involve bitcoin (46% of bitcoin transactions), which is close to the scale of the U.S. and European markets for illegal dr...

This report presents estimates of the size of the shadow economy in Moldova and Romania during the years 2015–2016. The estimates are based on surveys of entrepreneurs in both countries, following the method of Putniņš and Sauka (Journal of Comparative Economics 43:471–490, 2015). The components of the shadow economy captured by this approach inclu...

The SSE Riga Shadow Economy Index is estimated annually based on surveys of entrepreneurs in the Baltic countries using a number of surveying and data collection techniques shown to be effective in eliciting relatively truthful responses. The Index combines estimates of misreported business income, unregistered or hidden employees, as well as unrep...

This report presents estimates of the size of the shadow economy in Moldova and Romania during the years 2015-2016. The estimates are based on surveys of entrepreneurs in both countries, following the method of Putniņš and Sauka (2015). The components of the shadow economy captured by this approach include misreported business income, unregistered...

The SSE Riga Shadow Economy Index is estimated annually based on surveys of entrepreneurs in the Baltic countries. It combines misreported business income, unregistered or hidden employees, and ‘envelope’ wages to estimate the shadow economies as a proportion of GDP. Following the trend since 2015, there has been a modest increase in the size of th...

We exploit a unique natural experiment—recent restrictions of dark trading in Canada and Australia—and proprietary trade-level data to analyze the effects of dark trading. Disaggregating two types of dark trading, we find that dark limit order markets are beneficial to market quality, reducing quoted, effective, and realized spreads and increasing...

We develop a parsimonious liquidity-adjusted downside capital asset pricing model to investigate whether phenomena such as downward liquidity spirals and flights to liquidity impact expected asset returns. We find strong empirical support for the model. Downside liquidity risk (sensitivity of stock liquidity to negative market returns) has an econo...

Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2480870

We examine returns, order flow, and market conditions in the minutes before, during, and after NYSE and Nasdaq short sales. We find two distinct types of short sales: those that provide liquidity, and those that demand it. Liquidity-supplying shorts are strongly contrarian at intraday horizons. They trade when spreads are unusually wide, facing gre...

We investigate which of the two main centers of gold trading-the London spot market and the New York futures market-plays a more important role in setting the price of gold. Using intraday data during a 17-year period, we find that although both markets contribute to price discovery, the New York futures play a larger role on average. This is strik...

State-owned enterprises (SOEs) account for a substantial proportion of gross domestic product, employment, and assets in many countries. Based on a review of the theory and empirical evidence, we develop a novel five-step framework that can guide policymakers and economic advisors in making decisions about maintaining and/or creating SOEs. The fram...

This study develops a method that uses surveys of company managers to measure the size of a shadow economy. Our method is based on the premise that company managers are the most likely to know how much business income and wages go unreported due to their unique position in dealing with both of these types of income. We use a range of survey design...

This paper sheds light on Latvian exporters – how active they are, what challenges they face, what makes them succeed or fail. Our study draws on a survey of 503 medium-sized Latvian companies. We fnd that most medium-sized Latvian companies are exporters (either directly or indirectly) and for a typical exporting company, export turnover constitut...

A market is typically considered to dominate price discovery if it is the first to reflect new information about the fundamental value. Our simulations indicate that common price discovery metrics - Hasbrouck information share and Harris-McInish-Wood component share - are only consistent with this view of price discovery if the price series have eq...

A market is typically considered to dominate price discovery if it is the first to reflect new information about the fundamental value. Our simulations indicate that common price discovery metrics – Hasbrouck information share and Harris-McInish-Wood component share – are only consistent with this view of price discovery if the price series have eq...

This paper contributes to the debate about the extent to which liquidity risk affects asset prices. Motivated by evidence on downward liquidity spirals, flights to liquidity and investor perceptions of risk, we develop and test a liquidity-adjusted capital asset pricing model in which the key innovation is separating liquidity risk into asymmetric...

In this paper, we develop two automated authorship attribution schemes, one based on Multiple Discriminant Analysis (MDA) and the other based on a Support Vector Machine (SVM). The classification features we exploit are based on word frequencies in the text. We adopt an approach of preprocessing each text by stripping it of all characters except a-...

This study examines what drives informed traders to provide liquidity by submitting limit orders versus consuming liquidity by submitting market orders. Based on recent theoretical work on limit order markets, we develop and validate two empirical measures of the relative use of market orders by informed traders: (i) how quickly limit order book qu...

We analyze the effects of dark trading using a unique natural experiment (recent restrictions of dark trading in Canada) and proprietary trade-level data. Disaggregating dark trading, we find that dark limit order markets are beneficial to market quality (reducing quoted, effective and realized spreads and increasing informational efficiency), whil...

We empirically analyze the prevalence and economic underpinnings of closing price manipulation and its detection. We estimate that approximately one percent of closing prices are manipulated, of which only a small fraction is detected and prosecuted. We find that stocks with high levels of information asymmetry and mid to low levels of liquidity ar...

Regulators and stock exchanges around the world are concerned that growth in the share of equities volume executed without pre-trade transparency, so called ‘dark trading’, may harm price discovery. We empirically analyze the impact of dark trading on price discovery. We find that aggregate price discovery is impeded and prices become less informat...

We examine stock returns, order flow, and market conditions in the minutes before, during, and after recent short sales on the NYSE and Nasdaq. We find two very distinct types of short sales: those that provide liquidity, and those that demand it. Shorts that supply liquidity do so when spreads are unusually wide. These short sellers are also stron...

Regulators globally are concerned that dark trading harms price discovery. We show that dark trades are less informed than lit trades. High levels of dark trading increase adverse selection risk on the lit exchange by increasing the concentration of informed traders. Using both high- and low-frequency measures of informational efficiency we find th...

This study develops and estimates an index of the size of shadow economies in Estonia, Latvia and Lithuania, and analyses the factors that influence participation in the shadow sector. The index can be used to track shadow economies through time or across sectors and therefore is a useful tool to evaluate the effectiveness of policies aimed ar redu...

We exploit a quasi-experiment to examine the effects of market makers and stock analysts in three emerging stock markets. We find substantial differences in the effects across markets and, in contrast to existing literature, the effects of market makers are not always positive. Our results suggest that the structure of market makers’ agreements and...

Despite the significant attention that market manipulation has received in recent years many aspects of it are poorly understood. This article identifies from the theoretical and empirical literature what we do and do not know about market manipulation, and suggests directions for future research. We know that manipulation is possible and that it o...

We study the effects of closing price manipulation in an experimental market to evaluate the social harm caused by manipulation. We find that manipulators, given incentives similar to many actual manipulation cases, decrease price accuracy and liquidity. The mere possibility of manipulation alters market participants’ behavior, leading to reduced l...

This paper examines the use, determinants and impact of anonymous orders in a market where disclosure of broker identity in the trading screen is voluntary. We find that most trading occurs non-anonymously, contrary to prior literature that suggests liquidity gravitates to anonymous markets. By strategically using anonymity when it is beneficial, t...

We quantify the effects of closing price manipulation on trading characteristics and stock price accuracy using a unique sample of prosecuted manipulation cases. Based on these findings we construct an index of the probability and intensity of closing price manipulation. As well as having regulatory applications, this index can be used to study man...

We examine the informativeness of short sellers by directly measuring the abnormal returns earned on individual short sales on the New York Stock Exchange. We find that short sellers correctly predict permanent negative future returns and improve market efficiency by trading against instances of overpricing. Their informational advantage is greater...

This article outlines the process of clearing and settlement for stock trades in the US. It pays particular attention to what happens when the seller of a stock fails to deliver that stock at settlement and describes the mechanisms to resolve delivery failures. Fails to deliver can occur for a number of reasons, such as human error, administrative...

We study the effects of closing price manipulation in an experimental market to evaluate the social harm caused by manipulation. We find that manipulators, given incentives similar to many actual manipulation cases, decrease price accuracy and liquidity. The mere possibility of manipulation alters market participants' behavior, leading to reduced l...

We quantify the effects of closing price manipulation on trading characteristics and stock price accuracy using a unique sample of prosecuted manipulation cases. Based on these findings we construct an index of the probability and intensity of closing price manipulation. As well as having regulatory applications, this index can be used to study man...

We empirically analyze the prevalence and economic underpinnings of closing price manipulation and its detection using methodology that overcomes biases caused by incomplete detection. We find that stocks with high levels of information asymmetry and mid to low levels of liquidity are most likely to be manipulated. A significant proportion of manip...

We examine the informativeness of short sellers by directly measuring the abnormal returns earned on individual short sales on the New York Stock Exchange. We find that short sellers correctly predict permanent negative future returns and improve market efficiency by trading against instances of overpricing. Their informational advantage is greater...