Market structure, informational e$ciency and liquidity: An experimental comparison of auction and dealer markets
نویسنده
چکیده
We report the results of 18 market experiments that were conducted in order to compare the call market, the continuous auction and the dealer market. Transaction prices in the call and continuous auction markets are much more e$cient than prices in the dealer markets. The call market shows a tendency towards underreaction to new information. Execution costs are lowest in the call market and highest in the dealer market. The trading volume and Roll's (Journal of Finance (1984) 1127}1139) serial covariance estimator are inappropriate measures of execution costs in the present context. The relation between private signals, trading decisions and trading pro"ts is analyzed. ( 2000 Elsevier Science B.V. All rights reserved. JEL classixcation: C90; G14
منابع مشابه
Comparing Market Structures: Allocative and Informational Efficiencies of Continuous Trading, Periodic Auctions, and Dark Pools
This paper compares three market structures in a dynamic dealer-mediated market with asymmetric information about an asset’s value. The compared market structures are (i) the continuous protocol of Glosten and Milgrom (1985), where a just-arrived trader trades immediately at a bid or an ask price publicly posted by the dealer, (ii) the periodic auction, wherein trades are cleared in batches, pu...
متن کاملSpread Components and Dealer Profits in the Interbank Foreign Exchange Market
This paper studies dealer trading profits, spread components and implications for market making costs for a representative dealer in the foreign exchange market. Though accounting for only about 14% of total trade volume, customer trades generate about 75% of the dealer’s gross trading profits. Inter-dealer trades have negligible profit implications for the dealer who maintains his function as ...
متن کاملLiquidity, Volume, and Price Behavior: The Impact of Order vs. Quote Based Trading
We provide a three way theoretical comparison of dealer, limit order, and hybrid markets and analyze the impact that the organization of trading has on volume, liquidity, and price efficiency. We find, in particular, that trading volume is highest in the limit order market and lowest in the dealer market. Small order price impacts are lowest and large order price impacts are highest in limit or...
متن کاملTransfer of price returns in the markets, gold, stock exchanges and housing Considering the liquidity ratio.
Examining the transfer of returns in the markets helps analysts to identify the reasons for the movement of liquidity ratio between the markets. In this study, the monthly data of the gold market price index, housing, stock exchange and the currency has been used in Iran for the past twenty years. Investigating the interactions between price returns The stock market, housing, currency and gol...
متن کاملShould Securities Markets Be Transparent?
While efficient price discovery is crucial, there is another equally important attribute of markets that merits consideration, namely liquidity. Efficient prices, after all, are unimportant if one can transact only a 100-share lot at these prices. Liquidity was historically provided by dealers who buy or sell securities on demand. In the past, where communication links were poor and buyers and ...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
دوره شماره
صفحات -
تاریخ انتشار 2000