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Market-Dynamics Research Wins 2014 AQR Insight Award

A Model of Current Market Structure and an Alternative Design Wins the Annual $100,000 Prize for Unpublished Papers     

GREENWICH, Conn. - Wednesday, May 28th 2014 [ME NewsWire]

(BUSINESS WIRE) AQR Capital Management, LLC today presented its third annual AQR Insight Award to Eric Budish, Ph.D., Peter Cramton, Ph.D., and John J. Shim for their path-breaking unpublished paper on market dynamics and market structure in a world of high-frequency trading.

In their paper, “The High-Frequency Trading Arms Race: Frequent Batch Auctions as a Market Design Response,” Budish, an Associate Professor of Economics at the University of Chicago; Cramton, a Professor of Economics at the University of Maryland, College Park; and Shim, a Chicago Ph.D. student, show how arbitrage between exchanges keeps relative prices in check, but also imposes a cost on liquidity providers when their limit orders become stale and are “picked off” before they are canceled.

The paper highlights some important costs and benefits of both continuous trading and discrete auctions in a stylized setting. While the model leaves out several aspects of the real world such as information asymmetry and competition between exchanges, effects that will also strongly influence which design would be best for investors, it does analyze one alternative market structure that addresses the narrow class of issues studied.

“As the authors would agree, it's an early model that omits some important aspects of the real world, but it is vital that we better understand different market structure solutions,” said AQR Founding Principal, David G. Kabiller. “While AQR does not endorse the authors’ conclusions, we do believe this paper is an important step to formalizing the study of alternative designs.”

The AQR Insight Award was introduced in 2011 to acknowledge and encourage academic research and recognize important and novel work on real issues facing institutional investors. This year’s winning paper takes an intelligent approach toward the modeling of critical issues about market efficiency and transaction costs — topics of great interest to all investors.

The winning paper was among five finalists that the AQR Insight Award Committee selected out of submissions from 26 countries. All five finalists presented their research in person at the AQR Exchange in Greenwich, Conn., on April 24.

The other finalists, awarded honorable mentions, were:

“Comomentum: Inferring Arbitrage Activity From Return Correlations”

Dong Lou, Ph.D., London School of Economics

Christopher Polk, Ph.D., London School of Economics

“Structural GARCH: The Volatility-Leverage Connection”

Robert Engle, Ph.D., NYU Stern School of Business

Emil Siriwardane, NYU Stern School of Business

“The Risk Premia Embedded in Index Options”

Torben G. Andersen, Ph.D., Kellogg School of Management, Northwestern University

Nicola Fusari, Ph.D., Johns Hopkins Carey Business School

Viktor Todorov, Ph.D., Kellogg School of Management, Northwestern University

“The Worst, the Best, Ignoring All the Rest: The Rank Effect and Trading Behavior”

Samuel M. Hartzmark, University of Southern California Marshall School of Business

To read the finalists papers or for more information about the AQR Insight Award, please visit

About the AQR Insight Award

To honor and encourage applied innovation in academic research, the AQR Insight Award, sponsored by AQR Capital Management, LLC recognizes important, unpublished papers that provide the most significant new practical insights for tax-exempt institutional or taxable investor portfolios. As many as three papers share a $100,000 prize.

The deadline for submitting papers for consideration in the fourth annual AQR Insight Award competition is January 15, 2015.

About AQR

AQR is a global investment management firm built at the intersection of financial theory and practical application. We strive to deliver superior, long-term results for our clients by looking past market noise to identify and isolate what matters most, and by developing ideas that stand up to rigorous testing. Our focus on practical insights and analysis has made us leaders in alternative and traditional strategies since 1998.

As of April 1, 2014, AQR managed $105.1 billion*. The firm is based in Greenwich, Connecticut, with offices in Chicago, Los Angeles, London, Sydney and Bermuda.

* Includes assets of CNH Partners, LLC, an AQR affiliate

This is being provided solely for information purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase securities or financial instruments, and may not be construed as such or serve as the basis of any investment decision.


AQR Capital Management, LLC

Marge Wyrwas, 203-742-3608






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