Yunus Topbas

EDUCATION

• Ph.D. Economics, Northwestern University, 2022
• M.Sc. Finance and Economics (Research), London School of Economics, 2020
• M.A. Economics, Northwestern University, 2017
• M.A. Economics, Bogazici University, 2016
• B.A. Management & Economics (double-major), Bogazici University, 2014

Fields of Specialization:

• Empirical Asset Pricing, Market Microstructure, Information Economics

RESEARCH

Working Papers

This paper investigates how the contrasting trends in media coverage and earnings guidance over the past two decades have affected stock price informativeness. I develop a model to understand what trade-offs investors face when acquiring information through the media and how earnings guidance changes those trade-offs. In the model, the effects of media coverage and earnings guidance on price informativeness are ambiguous. To resolve this ambiguity, I empirically test which predictions of the model are supported by the data. I show that, contrary to the common belief, high media coverage could discourage a considerable fraction of investors from information-seeking activities and cause lower price informativeness. In particular, media coverage has a hump-shaped impact on price informativeness. I also find that the impact of earnings guidance on price informativeness depends on media coverage. Earnings guidance improves price informativeness only at high levels of media coverage.

Asset Complementarity, Coordination and Transparency of Information

We document that part of the theoretical results favoring full transparency is due to a missing channel: complementarities between assets. We question the role and effectiveness of public information as a coordination device in a setting where complementarities exist within an asset (intra-asset complementarity) and between assets (inter-asset complementarity). The introduction of inter-asset complementarity increases strategic uncertainty and makes the coordinating role of public information more prominent. The results indicate that more transparency is not always optimal from a social perspective. Full transparency is optimal if agents have access to relatively more precise private information and complementarities are sufficiently low. More transparency otherwise reduces social welfare as the gain from better intra-asset coordination is outweighed by the loss resulting from lesser inter-asset coordination. The non-monotonic impact of transparency on social welfare remains valid with more than two assets as long as sufficient number of assets are strategic complements to each other in an intra- and inter-related manner and those complementarities are sufficiently high.

Work in Progress

Dark Pools and Market Quality: Trade vs Operational Transparency (with Mao Ye)

In an effort to increase market transparency and enhance investor confidence in the equity market, three crucial changes were made in the regulations of Dark Pools (DPs) and non-ATS Broker-Dealers (BDs) in recent years. Starting from May 2014, as per FINRA Rule 4552, DPs are required to report their volume and trade information to FINRA on a weekly basis. A similar regulation was adopted for non-ATS BDs in April 2016. In Feb 2019, a new Form ATS-N was adopted, which requires DPs to publicly disclose information about the details of their manner of operations and their relations with the broker-dealers that operate them. We investigate (i) the impacts of these regulation changes on the market quality of DPs and BDs; and (ii) whether trade transparency (Rule 4552) and operational transparency (Form ATS-N) have different impacts on market quality. We find that trade transparency increases effective spread and price impact, and reduces realized spread. Operational transparency has the opposite effect: it reduces effective spread and price impact, and increases realized spread. Our results have important policy implications. Trade transparency might harm the market quality and hence recent regulatory attempts trying to increase it in DPs should be worth reconsidering. In contrast, operational transparency might improve the market quality and therefore more regulatory efforts should be exerted in this direction as still very little is known about how DPs actually operate.

Off-Exchange Trading and Stock Price Informativeness

SEC Chairman Gary Gensler recently renewed his criticism of off-exchange venues’ growing market shares in the US equity market. This paper studies the impacts on price informativeness of two particular types of off-exchange venues: Dark Pools and Wholesalers (e.g., Virtu, Citadel). I show that dark pools that allow non-block trading improve price informativeness. It suggests that non-block dark pools attract informed traders. To support this idea, I break down the pools according to their subscribers and show that the pools accepting Principal Trading Firms to their platforms contribute more to price informativeness. However, unlike dark pools, trading in wholesalers adversely affects price informativeness. It might be because higher retail trading activity in these platforms through Payment for Order Flow could deteriorate informativeness of prices. To provide further evidence, I use the outbreak of COVID-19 as an exogenous increase in retail trading activity in wholesalers and show that they affect price informativeness more negatively in the post-COVID period. The results are preliminary and thus should be interpreted carefully. With that being said, they emphasize two important points. First, trading platforms not acting as principals could also contribute to price discovery. Second, concentration of retail trading in a few platforms might harm informational content of prices even if Payment for Order Flow was not harmful per se.