Market liquidity : theory, evidence, and policy / Thierry Foucault, Marco Pagano, Ailsa Roell

Format:

Book

Author/Creator:

Foucault, Thierry, author.

Pagano, Marco, author.

Röell, Ailsa, 1955- author.

Language:

English

Subjects (All):

Liquidity (Economics).

Securities.

Capital market.

Physical Description:

1 online resource (xv, 424 pages) : illustrations

Edition:

1st ed.

Place of Publication:

New York, NY : Oxford University Press, [2013]

Language Note:

English

Summary:

The way in which securities are traded is very different from the idealized picture of a frictionless and self-equilibrating market offered by the typical finance textbook. This book offers a more accurate and authoritative take on liquidity and price discovery.

Contents:

Cover

Contents

Preface

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

PART ONE: Institutions

1 Trading Mechanics and Market Structure

1.1 Introduction

1.2 Limit Order Markets and Dealer Markets

1.3 Does Market Structure Matter?

1.4 Evolution of Market Structure

1.5 Further Reading

1.6 Exercises

2 Measuring Liquidity

2.1 Introduction

2.2 Measures of the Spread

2.3 Other Measures of Implicit Trading Costs

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

3.4 Price Dynamics with Order-Processing Costs

3.5 Price Dynamics with Inventory Risk

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

4.3 Market Depth with Inventory Risk

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

5.3 Measuring the Permanent Impact of Trades

5.4 Probability of Informed Trading (PIN)

5.5 Further Reading

5.6 Exercises

PART TWO: Market Design and Regulation

6 Limit Order Book Markets

6.1 Introduction

6.2 A Model of the Limit Order Book (LOB)

6.3 The Design of Limit Order Book Markets

6.4 The Make or Take Decision in LOB Markets

6.5 Further Reading

6.6 Appendix

6.7 Exercises

7 Market Fragmentation.

7.1 Introduction

7.2 The Costs of Fragmentation

7.3 Liquidity Externalities

7.4 The Benefits of Fragmentation

7.5 Regulation

7.6 Further Reading

7.7 Exercises

8 Market Transparency

8.1 Pre-trade Transparency

8.2 Post-trade Transparency

8.3 Revealing Trading Motives

8.4 Why are Markets so Opaque?

8.5 Further Reading

8.6 Exercises

PART THREE: Implications for Asset Prices, Financial Crises, and Corporate Policies

9 Liquidity and Asset Prices

9.1 Introduction

9.2 Illiquidity and Asset Prices

9.3 Liquidity Risk and Asset Prices

9.4 Liquidity and Limits to Arbitrage

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

10.5 Corporate Policies and Market Liquidity

10.6 Further Reading

10.7 Exercises

References

Author Index

A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

P

R

S

T

V

W

X

Y

Z

Subject Index

Q

U

W.

Notes:

Bibliographic Level Mode of Issuance: Monograph

Includes bibliographical references and indexes.

Description based on print version record.

ISBN:

0-19-932409-3