Market liquidity: theory, evidence, and policy
Saved in:
| Main Authors: | , , |
|---|---|
| Format: | Book |
| Language: | English |
| Published: |
Oxford [u.a.]
Oxford Univ. Press
2013
|
| Subjects: | |
| Online Access: | Inhaltsverzeichnis |
| Physical Description: | XV, 424 S. graph. Darst. |
| ISBN: | 9780199936243 |
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MARC
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| 245 | 1 | 0 | |a Market liquidity |b theory, evidence, and policy |c Thierry Foucault ; Marco Pagano ; Ailsa Röell |
| 264 | 1 | |a Oxford [u.a.] |b Oxford Univ. Press |c 2013 | |
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Record in the Search Index
| _version_ | 1804150463466045440 |
|---|---|
| adam_text | CONTENTS
Preface
xii
Introduction
1
0.1
What is This Book About?
1
0.2
Why Should We Care?
4
0.3
Some Puzzles
5
0.4
The Three Dimensions of Liquidity
8
0.4.1
Market Liquidity
8
0.4.2
Funding Liquidity
9
0.4.3
Monetary Liquidity
10
PART ONE Institutions
1
Trading Mechanics and Market Structure
15
1.1
Introduction
15
1.2
Limit Order Markets and Dealer Markets
17
1.2.1
Limit Order Markets
17
1.2.2
Dealer Markets
23
1.2.3
Hybrid Markets
27
1.2.4
Market Transparency
28
1.3
Does Market Structure Matter?
31
1.4
Evolution of Market Structure
32
1.4.1
Who Makes the Rules?
32
1.4.2
Competition between Exchanges
34
1.4.3
Automation
37
1.5
Further Reading
44
1.6
Exercises
44
2
Measuring Liquidity
46
2.1
Introduction
46
2.2
Measures of the Spread
49
2.2.1
The Quoted Spread
49
2.2.2
The Effective Spread
50
viii CONTENTS
2.2.3
The Realized Spread
53
2.3
Other Measures of Implicit Trading Costs
55
2.3.1
Volume-weighted Average Price
55
2.3.2
Measures Based on Price Impact
56
2.3-3
Non-trading Measures
58
2.3.4
Measures Based on Return Covariance
59
2.4
Implementation Shortfall
65
2.5
Hands-on Estimation of Transaction Costs
68
2.6
Further Reading
68
2.7
Appendix
69
2.8
Exercises
72
3
Order Flow, Liquidity, and Securities Price Dynamics
77
3.1
Introduction
77
3.2
Price Dynamics and the Efficient Market Hypothesis
81
3.3
Price Dynamics with Informative Order Flow
84
3.3
Л
The Glosten-Milgrom Model
85
3.3.2
The Determinants of the Bid-Ask Spread
87
3.3.3
How Do Dealers Revise their Quotes?
92
3.3.4
Price Discovery
94
3.3.5
The Implications for Price Movements and Volatility
98
3.4
Price Dynamics with Order-Processing Costs
101
3.4.1
Bid-Ask Spread with Order-Processing Costs
101
3.4.2
Price Dynamics with Order-Processing and
Adverse-Selection Costs
102
3.5
Price Dynamics with Inventory Risk
106
3.5.1
A Two-Period Model
108
3.5.2
A Multi-Period Model
112
3.5.3
The dynamics of prices and inventories
115
3.6
The Full Picture
120
3.7
Further Reading
122
3.8
Exercises
123
4
Trade Size and Market Depth
132
4.1
Introduction
132
4.2
Market Depth under Asymmetric Information
134
4.2.1
Learning from Order Size
135
4.2.2
Perfectly Competitive Dealers
137
4.2.3
The Informed Trader s Order Placement Strategy
140
4.2.4
Imperfectly Competitive Dealers
144
4.3
Market Depth with Inventory Risk
148
Contents
4.3.1
Perfectly Competitive Dealers
148
43.2
Imperfectly Competitive Dealers
151
4.4
Further Reading
153
4.5
Appendix A
154
4.6
Appendix
В
156
4.7
Exercises
157
Estimating the Determinants of Market Illiquidity
163
5.1
Introduction
163
5.2
Price Impact Regressions
165
5.2.1
Without Inventory Costs
166
5.2.2
With Inventory Costs
170
5.3
Measuring the Permanent Impact of Trades
176
5.4
Probability of Informed Trading (PIN)
179
5.5
Further Reading
184
5.6
Exercises
184
PART TWO Market Design and Regulation
6
Limit Order Book Markets
191
6.1
Introducti on
191
6.2
A Model of the Limit Order Book (LOB)
193
6.2.1
The Market Environment
193
6.2.2
Execution Probability and Order Submission Cost
196
6.2.3
Limit Order Trading with Informed Investors
198
6.3
The Design of Limit Order Book Markets
204
6.3-1
Tick Size
204
6.3.2
Priority Rules
207
6.3.3
Hybrid LOB Markets
209
6.4
The Make or Take Decision in LOB Markets
213
6.4.1
Risk of Being Picked OfFand Risk of Non-Execution
214
6.4.2
Bid-Ask Spreads and Execution Risk
217
6.4.3
Bid-Ask Spreads and Volatility
220
6.4.4
Indexed Limit Orders, Monitoring, and Algorithmic
Trading
223
6.4.5 Order Flow and the State of the LOB
225
6.5
Further Reading
230
6.6
Appendix
232
6.7
Exercises
232
CONTENTS
7 Market
Fragmentation
236
7.1
Introduction
236
7.2
The Costs of
Fragmentation
241
7.2.1
Information Effects
242
7.2.2
Risk-sharing Effects
246
7.2.3
Competition among Liquidity Suppliers
248
7.2.4
Fragmentation and the Broker-Client Relationship
251
7.3
Liquidity Externalities
253
7.3.1
Liquidity Begets Liquidity
254
7.3.2
Low-liquidity Traps
256
7.4
The Benefits of Fragmentation
256
7.4.1
Curbing the Pricing Power of Exchanges
256
7.4.2
Sharper Competition among Liquidity Providers
259
7.4.3
Trade-throughs
265
7.5
Regulation
268
7.5.1
Regulation
NMS
268
7.5.2
MiFID
271
7.6
Further Reading
275
7.7
Exercises
275
8
Market Transparency
278
8.1
Pre-trade Transparency
279
8.1.1
Quote Transparency and Competition between
Dealers
280
8.1.2
Quote Transparency and Execution Risk
282
8.1.3
Order Flow Transparency
284
8.2
Post-trade Transparency
287
8.3
Revealing Trading Motives
292
8.4
Why are Markets so Opaque?
296
8.4.1
Rent Extraction and Lobbying
297
8.4.2
Opacity can Withstand Competition
298
8.4.3
The Bright Side of Opacity
299
8.5
Further Reading
301
8.6
Exercises
303
PART THREE Implications for Asset Prices, Financial Crises, and
Corporate Policies
9
Liquidity and Asset Prices
307
9.1
Introduction
307
Contents
9.2
liquidity and Asset Prices
308
9.2.1
The Illiquidity Premium
308
9.2.2
Clientele Effects
313
9-2.3
Evidence
314
9.2.4
Asymmetric Information, Illiquidity, and Asset
Returns
318
9.2.5
Illiquidity
Premia
in OTC Markets
320
9.3
Liquidity Risk and Asset Prices
322
9.4
Liquidity and Limits to Arbitrage
325
9.4.1
Risk of Early Liquidation as a Limit to Arbitrage
328
9.4.2
Limited Speculative Capital as a Barrier to Arbitrage
331
9.4.3
Implications for Market Making and Liquidity
Crises
336
9.5
Correlated Order Flow and Noise Trader Risk
339
9.6
Further Reading
341
9.7
Appendix. The Derivation of the Search Model
343
9.8
Exercises
347
10
Liquidity, Price Discovery, and Corporate Policies
350
10.1
Introduction
350
10.2
Market Liquidity and Corporate Investment
351
10.3
Market Liquidity and Corporate Governance
354
10.4
Price Discovery, Corporate Investment, and Executive
Compensation
360
10.4.1
Stock Prices and Investment Allocation
361
10.4.2
Stock Prices and Executive Compensation
368
10.5
Corporate Policies and Market Liquidity
372
10.5.1
Listing and Cross-listing
373
10.5.2
Designated Market Makers
375
10.5.3
Disclosure Policy
376
10.5.4
Capital Structure
380
10.6
Further Reading
382
10.7
Exercises
386
References
389
Author Index
410
Subject Index
416
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| id | DE-604.BV041088451 |
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| indexdate | 2024-07-10T00:39:19Z |
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| language | English |
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| spelling | Foucault, Thierry Verfasser (DE-588)129193283 aut Market liquidity theory, evidence, and policy Thierry Foucault ; Marco Pagano ; Ailsa Röell Oxford [u.a.] Oxford Univ. Press 2013 XV, 424 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier Liquidity (Economics) Securities Capital market Liquidität (DE-588)4035908-6 gnd rswk-swf Kapitalmarkt (DE-588)4029578-3 gnd rswk-swf Kapitalmarkt (DE-588)4029578-3 s Liquidität (DE-588)4035908-6 s b DE-604 Pagano, Marco Verfasser (DE-588)128434643 aut Röell, Ailsa 1955- Verfasser (DE-588)124394841 aut Erscheint auch als Online-Ausgabe 978-0-19-933305-9 (DE-604)BV046821513 Digitalisierung UB Regensburg - ADAM Catalogue Enrichment application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=026065089&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Foucault, Thierry Pagano, Marco Röell, Ailsa 1955- Market liquidity theory, evidence, and policy Liquidity (Economics) Securities Capital market Liquidität (DE-588)4035908-6 gnd Kapitalmarkt (DE-588)4029578-3 gnd |
| subject_GND | (DE-588)4035908-6 (DE-588)4029578-3 |
| title | Market liquidity theory, evidence, and policy |
| title_auth | Market liquidity theory, evidence, and policy |
| title_exact_search | Market liquidity theory, evidence, and policy |
| title_full | Market liquidity theory, evidence, and policy Thierry Foucault ; Marco Pagano ; Ailsa Röell |
| title_fullStr | Market liquidity theory, evidence, and policy Thierry Foucault ; Marco Pagano ; Ailsa Röell |
| title_full_unstemmed | Market liquidity theory, evidence, and policy Thierry Foucault ; Marco Pagano ; Ailsa Röell |
| title_short | Market liquidity |
| title_sort | market liquidity theory evidence and policy |
| title_sub | theory, evidence, and policy |
| topic | Liquidity (Economics) Securities Capital market Liquidität (DE-588)4035908-6 gnd Kapitalmarkt (DE-588)4029578-3 gnd |
| topic_facet | Liquidity (Economics) Securities Capital market Liquidität Kapitalmarkt |
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