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" Market liquidity : "
Thierry Foucault, Marco Pagano, Ailsa Roell.
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BL
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| Record Number
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102646
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| Doc. No
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b59843
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| Main Entry
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Foucault, Thierry.
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| Title & Author
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Market liquidity : : theory, evidence, and policy /\ Thierry Foucault, Marco Pagano, Ailsa Roell.
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| Publication Statement
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New York :: Oxford University Press,, c2013.
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| Page. NO
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xv, 424 p. :: ill. ;; 25 cm.
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| ISBN
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9780199936243 (cloth : alk. paper)
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: 0199936242 (cloth : alk. paper)
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| Bibliographies/Indexes
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Includes bibliographical references and indexes.
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| Contents
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Introduction -- 0.1.What is This Book About? -- 0.2.Why Should We Care? -- 0.3.Some Puzzles -- 0.4.The Three Dimensions of Liquidity -- 0.4.1.Market Liquidity -- 0.4.2.Funding Liquidity -- 0.4.3.Monetary Liquidity -- 1.Trading Mechanics and Market Structure -- 1.1.Introduction -- 1.2.Limit Order Markets and Dealer Markets -- 1.2.1.Limit Order Markets -- 1.2.2.Dealer Markets -- 1.2.3.Hybrid Markets -- 1.2.4.Market Transparency -- 1.3.Does Market Structure Matter? -- 1.4.Evolution of Market Structure -- 1.4.1.Who Makes the Rules? -- 1.4.2.Competition between Exchanges -- 1.4.3.Automation -- 1.5.Further Reading -- 1.6.Exercises -- 2.Measuring Liquidity -- 2.1.Introduction -- 2.2.Measures of the Spread -- 2.2.1.The Quoted Spread -- 2.2.2.The Effective Spread -- 2.2.3.The Realized Spread -- 2.3.Other Measures of Implicit Trading Costs -- 2.3.1.Volume-weighted Average Price -- 2.3.2.Measures Based on Price Impact -- 2.3.3.Non-trading Measures -- 2.3.4.Measures Based on Return Covariance -- 2.4.Implementation Shortfall -- 2.5.Hands-on Estimation of Transaction Costs -- 2.6.Further Reading -- 2.7.Appendix -- 2.8.Exercises -- 3.Order Flow, Liquidity, and Securities Price Dynamics -- 3.1.Introduction -- 3.2.Price Dynamics and the Efficient Market Hypothesis -- 3.3.Price Dynamics with Informative Order Flow -- 3.3.1.The Glosten-Milgrom Model -- 3.3.2.The Determinants of the Bid-Ask Spread -- 3.3.3.How Do Dealers Revise their Quotes? -- 3.3.4.Price Discovery -- 3.3.5.The Implications for Price Movements and Volatility -- 3.4.Price Dynamics with Order-Processing Costs -- 3.4.1.Bid-Ask Spread with Order-Processing Costs -- 3.4.2.Price Dynamics with Order-Processing and Adverse-Selection Costs -- 3.5.Price Dynamics with Inventory Risk -- 3.5.1.A Two-Period Model -- 3.5.2.A Multi-Period Model -- 3.5.3.The dynamics of prices and inventories -- 3.6.The Full Picture -- 3.7.Further Reading -- 3.8.Exercises -- 4.Trade Size and Market Depth -- 4.1.Introduction -- 4.2.Market Depth under Asymmetric Information -- 4.2.1.Learning from Order Size -- 4.2.2.Perfectly Competitive Dealers -- 4.2.3.The Informed Trader's Order Placement Strategy -- 4.2.4.Imperfectly Competitive Dealers -- 4.3.Market Depth with Inventory Risk -- 4.3.1.Perfectly Competitive Dealers -- 4.3.2.Imperfectly Competitive Dealers -- 4.4.Further Reading -- 4.5.Appendix A -- 4.6.Appendix B -- 4.7.Exercises -- 5.Estimating the Determinants of Market Illiquidity -- 5.1.Introduction -- 5.2.Price Impact Regressions -- 5.2.1.Without Inventory Costs -- 5.2.2.With Inventory Costs -- 5.3.Measuring the Permanent Impact of Trades -- 5.4.Probability of Informed Trading (PIN) -- 5.5.Further Reading -- 5.6.Exercises -- 6.Limit Order Book Markets -- 6.1.Introduction -- 6.2.A Model of the Limit Order Book (LOB) -- 6.2.1.The Market Environment -- 6.2.2.Execution Probability and Order Submission Cost -- 6.2.3.Limit Order Trading with Informed Investors -- 6.3.The Design of Limit Order Book Markets -- 6.3.1.Tick Size -- 6.3.2.Priority Rules -- 6.3.3.Hybrid LOB Markets -- 6.4.The Make or Take Decision in LOB Markets -- 6.4.1.Risk of Being Picked Off and Risk of Non-Execution -- 6.4.2.Bid-Ask Spreads and Execution Risk -- 6.4.3.Bid-Ask Spreads and Volatility -- 6.4.4.Indexed Limit Orders, Monitoring, and Algorithmic Trading -- 6.4.5.Order Flow and the State of the LOB -- 6.5.Further Reading -- 6.6.Appendix -- 6.7.Exercises -- 7.Market Fragmentation -- 7.1.Introduction -- 7.2.The Costs of Fragmentation -- 7.2.1.Information Effects -- 7.2.2.Risk-sharing Effects -- 7.2.3.Competition among Liquidity Suppliers -- 7.2.4.Fragmentation and the Broker-Client Relationship -- 7.3.Liquidity Externalities -- 7.3.1.Liquidity Begets Liquidity -- 7.3.2.Low-liquidity Traps -- 7.4.The Benefits of Fragmentation -- 7.4.1.Curbing the Pricing Power of Exchanges -- 7.4.2.Sharper Competition among Liquidity Providers -- 7.4.3.Trade-throughs -- 7.5.Regulation -- 7.5.1.Regulation NMS -- 7.5.2.MiFID -- 7.6.Further Reading -- 7.7.Exercises -- 8.Market Transparency -- 8.1.Pre-trade Transparency -- 8.1.1.Quote Transparency and Competition between Dealers -- 8.1.2.Quote Transparency and Execution Risk -- 8.1.3.Order Flow Transparency -- 8.2.Post-trade Transparency -- 8.3.Revealing Trading Motives -- 8.4.Why are Markets so Opaque? -- 8.4.1.Rent Extraction and Lobbying -- 8.4.2.Opacity can Withstand Competition -- 8.4.3.The Bright Side of Opacity -- 8.5.Further Reading -- 8.6.Exercises -- 9.Liquidity and Asset Prices -- 9.1.Introduction -- 9.2.Illiquidity and Asset Prices -- 9.2.1.The Illiquidity Premium -- 9.2.2.Clientele Effects -- 9.2.3.Evidence -- 9.2.4.Asymmetric Information, Illiquidity, and Asset Returns -- 9.2.5.Illiquidity Premia in OTC Markets -- 9.3.Liquidity Risk and Asset Prices -- 9.4.Liquidity and Limits to Arbitrage -- 9.4.1.Risk of Early Liquidation as a Limit to Arbitrage -- 9.4.2.Limited Speculative Capital as a Barrier to Arbitrage -- 9.4.3.Implications for Market Making and Liquidity Crises -- 9.5.Correlated Order Flow and Noise Trader Risk -- 9.6.Further Reading -- 9.7.Appendix. The Derivation of the Search Model -- 9.8.Exercises -- 10.Liquidity, Price Discovery, and Corporate Policies -- 10.1.Introduction -- 10.2.Market Liquidity and Corporate Investment -- 10.3.Market Liquidity and Corporate Governance -- 10.4.Price Discovery, Corporate Investment, and Executive Compensation -- 10.4.1.Stock Prices and Investment Allocation -- 10.4.2.Stock Prices and Executive Compensation -- 10.5.Corporate Policies and Market Liquidity -- 10.5.1.Listing and Cross-listing -- 10.5.2.Designated Market Makers -- 10.5.3.Disclosure Policy -- 10.5.4.Capital Structure -- 10.6.Further Reading -- 10.7.Exercises.
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| Subject
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Liquidity (Economics)
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| Subject
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Securities.
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| Subject
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Capital market.
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| Dewey Classification
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332/.041
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| LC Classification
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HG178.F64 2013
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| Added Entry
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Pagano, Marco.
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Re̲ll, Ailsa,1955-
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| Parallel Title
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Theory, evidence, and policy.
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