Price Discovery And Liquidity In A Fragmented Stock Market PDF Download
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| Author | : Mao Ye |
| Publisher | : |
| Total Pages | : 187 |
| Release | : 2011 |
| Genre | : |
| ISBN | : |
Download Price Discovery and Liquidity in a Fragmented Stock Market Book in PDF, ePub and Kindle
One of the most striking changes in U.S. equity markets has been the proliferation of trading venues. My dissertation studies the impact of market fragmentation on liquidity and price discovery from three different perspectives. The first section, coauthored with Maureen O'Hara, examines how fragmentation of trading is affecting the quality of trading. We use newly-available trade reporting facilities volumes to measure fragmentation levels in individual stocks, and we use a matched sample to compare execution quality and efficiency of stocks with more and less fragmented trading. We find market fragmentation generally reduces transaction costs, as measured by effective spread and realized spread, and increases execution speeds. Fragmentation does increase short-term volatility, but prices are more efficient in that they are closer to being a random walk. The second section focuses on a particular type of new trading mechanism, crossing network, in which buy and sell orders are passively matched using the price set by the stock exchange. The results show that the crossing network harms price discovery and the relative lack of revealed information most strongly affects stocks with high uncertainty in their fundamental values. I find that an increase in the uncertainty of the fundamental value of the asset increases the transaction costs in both markets, but stocks with higher fundamental value uncertainty are more likely to have higher market shares in the crossing network. The impact of different allocation rules in the crossing network on market outcomes is also examined. The third section tests the theoretical prediction of the second essay. I find that crossing networks have lower effective spread and price impact of trade, but they also have lower execution probability and speed of trade. Non-execution is positive correlated with price impact, decreases in trading volume and increases in volatility. Crossing networks have higher market share for stocks with lower volatility and higher volume. We also find that the underlying assumption in previous literature, that stocks with higher effective spreads have higher reductions in effective spread by trading in crossing networks, is not supported by data.
| Author | : Vassilios G. Papavassiliou |
| Publisher | : |
| Total Pages | : |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
Download Price Discovery and the Effects of Fragmentation on Market Quality Book in PDF, ePub and Kindle
Using a novel high-frequency data set, we examine the contribution of Greek trading to the price discovery process of a pair of Cypriot blue-chip, cross-listed stocks during overlapping trading hours. Additionally, we investigate the effects of market fragmentation on the home market's quality, as measured by microstructure-based liquidity measures. Contrary to earlier studies from other markets, our findings show that foreign stock exchanges can act as the leading contributors to price discovery and can concentrate the majority of trading activity and produce the lowest transaction costs. Our results also show that market fragmentation can lead to negative effects on market liquidity.
| Author | : Benjamin Clapham |
| Publisher | : |
| Total Pages | : |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
Download Price Discovery and Convergence in Fragmented Securities Markets Book in PDF, ePub and Kindle
This paper studies price discovery and price convergence in securities trading within a fragmented market environment where stocks are traded on multiple venues. Although alternative venues currently increase their market share, trading on these venues instantly dries out in case the dominant market switches to a call auction. In this situation, alternative markets await and adopt the official price signal of the dominant market although prices on these venues indicate price discovery. This phenomenon remains persistent at different levels of market fragmentation, indicating that alternative trading venues fully accept the price leadership role of the dominant market during call auctions, no matter their own market share.
| Author | : Robert A. Schwartz |
| Publisher | : John Wiley & Sons |
| Total Pages | : 482 |
| Release | : 2004-10-06 |
| Genre | : Business & Economics |
| ISBN | : 0471689882 |
Download Equity Markets in Action Book in PDF, ePub and Kindle
An in-depth look at the nature of market making and exchanges From theory to practicalities, this is a comprehensive, up-to-date handbook and reference on how markets work and the nuances of trading. It includes a CD with an interactive trading simulation. Robert A. Schwartz, PhD (New York, NY), is Marvin M. Speiser Professor of Finance and University Distinguished Professor in the Zicklin School of Business, Baruch College, CUNY. Reto Francioni, PhD (Zurich, Switzerland), is President and Chairman of the Board of SWX, the Swiss Stock Exchange, and former co-CEO of Consors Discount Broker AG, Nuremberg.
| Author | : Frédéric Abergel |
| Publisher | : John Wiley & Sons |
| Total Pages | : 194 |
| Release | : 2012-04-03 |
| Genre | : Business & Economics |
| ISBN | : 1119952786 |
Download Market Microstructure Book in PDF, ePub and Kindle
The latest cutting-edge research on market microstructure Based on the December 2010 conference on market microstructure, organized with the help of the Institut Louis Bachelier, this guide brings together the leading thinkers to discuss this important field of modern finance. It provides readers with vital insight on the origin of the well-known anomalous "stylized facts" in financial prices series, namely heavy tails, volatility, and clustering, and illustrates their impact on the organization of markets, execution costs, price impact, organization liquidity in electronic markets, and other issues raised by high-frequency trading. World-class contributors cover topics including analysis of high-frequency data, statistics of high-frequency data, market impact, and optimal trading. This is a must-have guide for practitioners and academics in quantitative finance.
| Author | : Bart Frijns |
| Publisher | : |
| Total Pages | : 52 |
| Release | : 2017 |
| Genre | : |
| ISBN | : |
Download The Interactions Between Price Discovery, Liquidity and Algorithmic Trading for US-Canadian Cross-Listed Shares Book in PDF, ePub and Kindle
We analyze price discovery dynamics for Canadian companies cross-listed on the NYSE from January 2004 to January 2011. We employ a structural vector autoregression to assess the interactions between price discovery, liquidity and algorithmic trading activity. We observe that over time, the U.S. market is gaining dominance in terms of price discovery. Improvements in liquidity increase a market's contribution to price discovery, and vice versa. We find that algorithmic trading activity is negatively related to price discovery, indicating negative externalities of high-frequency trading. These results are robust to regulatory changes in the U.S. and fragmentation in the Canadian financial markets.
| Author | : Deniz Ozenbas |
| Publisher | : Springer Nature |
| Total Pages | : 111 |
| Release | : 2022 |
| Genre | : Business enterprises |
| ISBN | : 3030748170 |
Download Liquidity, Markets and Trading in Action Book in PDF, ePub and Kindle
This open access book addresses four standard business school subjects: microeconomics, macroeconomics, finance and information systems as they relate to trading, liquidity, and market structure. It provides a detailed examination of the impact of trading costs and other impediments of trading that the authors call rictions It also presents an interactive simulation model of equity market trading, TraderEx, that enables students to implement trading decisions in different market scenarios and structures. Addressing these topics shines a bright light on how a real-world financial market operates, and the simulation provides students with an experiential learning opportunity that is informative and fun. Each of the chapters is designed so that it can be used as a stand-alone module in an existing economics, finance, or information science course. Instructor resources such as discussion questions, Powerpoint slides and TraderEx exercises are available online.
| Author | : Joachim Grammig |
| Publisher | : |
| Total Pages | : 40 |
| Release | : 2018 |
| Genre | : |
| ISBN | : |
Download Tumbling Titans? The Changing Patterns of Price Discovery in the U.S. Equity Market Book in PDF, ePub and Kindle
After the implementation of Regulation NMS in 2007, the U.S. equity market became highly fragmented. The traditional exchanges, in particular the New York Stock Exchange (NYSE), lost substantial trading volume to the off-exchange market. We investigate the extent to which this development has been accompanied by a fragmentation of price discovery across established exchanges and off-exchange trading venues. The results of analyzing high frequency data of 91 U.S. stocks over a period of six years show that the contribution of the NYSE to price discovery has sharply declined; as of 2012, it even was overtaken by the Nasdaq. Trading in the off-exchange market also contributes to price discovery with rapidly increasing shares. Using daily estimates, we document a positive link between liquidity and price discovery contributions and offer evidence that liquidity Granger-causes price discovery for NYSE, Nasdaq, and trades reported through trade-reporting facilities.
| Author | : Federica Salvadè |
| Publisher | : LAP Lambert Academic Publishing |
| Total Pages | : 92 |
| Release | : 2011-06-01 |
| Genre | : |
| ISBN | : 9783844382709 |
Download Fragmentation and Market Quality in European Stock Markets Book in PDF, ePub and Kindle
This work addresses two questions related to the market fragmentation debate: (i) How does the competition impact on the incumbent market liquidity? And on consolidated liquidity? (ii) Does the competition adversely affect the price discovery? In which market does the price discovery process take place? To this end we study the launch of Chi-x, a Multilateral trading facility, in the Italian market and in the English market.
| Author | : Laura A. Tuttle |
| Publisher | : |
| Total Pages | : |
| Release | : 2004 |
| Genre | : Stocks |
| ISBN | : |
Download Information Flow in a Fragmented Dealer Market Book in PDF, ePub and Kindle
Abstract: The 1990's were a period of rapid change in the trading of Nasdaq stocks. Advances in network technology improved the market's ability to trade efficiently and disseminate real-time information. Concurrently, regulatory changes mandated inclusion of alternate trading venues in the quote montage, and restricted the manner in which customer limit orders are handled by market makers. This dissertation explores the price formation process in the Nasdaq market, examining how fragmentation and imperfect transparency affects price formation. The first essay, "Price Discovery in Nasdaq Issues", investigates price leadership relationships between Nasdaq market makers and Electronic Communications Networks (ECNs). Using the Hasbrouck information share and Gonzalo-Granger common factor methodologies, I show that ECNs provide more than half of the price discovery for approximately one out of three Nasdaq 100 stocks, although ECNs trades account for less than 33% of any Nasdaq 100 issue's trading activity. The second essay, "Hidden Orders, Trading Costs and Information", explores non-displayed (reserve) depth in Nasdaq market-maker quotes in SuperSOES. While the presence of hidden depth at the inside has no effect on effective half-spreads, the information content of a trade (as measured by the midquote adjustment in the 30 minutes post-trade) is lower when reserve size is quoted, suggesting reserve size signals short-term price movements. Displayed depth does not predict daily returns, but the non-displayed orders of investment banks and wirehouses are indicative of daily price changes. In the final essay, "News or Noise: Is the Price Impact of Island Trades Persistent?", I examine the trades on the Island ECN to discover whether their information impact is transient or permanent. I measure price impact at a number of horizons, allowing for the possibility of price reversals from liquidity motivated trades. Using simple regressions, I show Island trades are more informative than other trades only at short time horizons post-trade; at longer horizons, the price impact of an Island trade is not significantly different from trades in other venues. Island trades can be shown to be more informative at longer horizons only when the experimental design controls for the endogeneity of the trading venue decision.
