scholarly journals Liquidity, Trading, and Price Determination in Equity Markets: A Finance Course Application

2021 ◽  
pp. 21-49
Author(s):  
Deniz Ozenbas ◽  
Michael S. Pagano ◽  
Robert A. Schwartz ◽  
Bruce W. Weber
Keyword(s):  
Market Structure ◽  
Price Discovery ◽  
Investment Decision ◽  
Equity Markets ◽  
Regulatory Environment ◽  
Trading Costs ◽  
Price Determination ◽  
Liquidity Trading ◽  
Portfolio Decision ◽  
Structure Regulation

AbstractTrading is the implementation of an investment decision. After a portfolio decision has been made by a portfolio manager, it must be implemented, and especially for handling large orders and navigating stressful markets, specific skills and responsibilities are needed that require the expertise of a professional trader. However, the efficiency with which orders are handled and turned into trades depends, not just on traders’ abilities, but also on a market’s liquidity, on the design of the marketplace where shares are traded, and on the regulatory environment. In this chapter, we cover trading costs, liquidity, volatility, price discovery, market structure, and market structure regulation.

A Challenge for Equity Markets on Both Sides of the Atlantic: Can Liquidity be Augmented, Volatility Better Controlled, and Price Discovery Sharpened?

2016 ◽  
Vol 28 (6) ◽  
Author(s):  
Robert A. Schwartz
Keyword(s):  
Market Structure ◽  
Price Discovery ◽  
Equity Markets ◽  
Critical Determinant ◽  
The Public ◽  
Market Makers ◽  
Liquidity Provision ◽  
The Us ◽  
Call Auction ◽  
Intraday Volatility

AbstractAfter suggesting that optimizing equity market structure remains a work in progress (as it has for the past five decades), the paper focuses on liquidity provision – a critical determinant of market quality – and its associations with intraday volatility and price discovery. Controlling intraday volatility and sharpening price discovery is of critical importance, it is not a simple matter, and it depends on market structure. After considering each term separately, we call attention to the public goods property of price discovery, set forth the traditional suppliers of liquidity (market makers, high frequency traders, and limit order placers), and contrast continuous and call auction trading. As liquidity is widely thought to be insufficient in equity markets in the US and Europe, we stress that listed companies should provide supplemental liquidity for their own shares and, to this end, we address a proposal that formalizes a corporate involvement.

Price discovery process in the emerging sovereign CDS and equity markets

2014 ◽  
Vol 21 ◽  
pp. 117-132 ◽  
Author(s):  
Geoffrey M. Ngene ◽  
M. Kabir Hassan ◽  
Nafis Alam
Keyword(s):  
Price Discovery ◽  
Equity Markets ◽  
Discovery Process ◽  
Price Discovery Process

scholarly journals Pattern Of Short-Term Volatility Accentuation Within The Trading Day: An Investigation Of The U.S. And European Equity Markets

2011 ◽  
Vol 5 (2) ◽  
Author(s):  
Deniz Ozenbas
Keyword(s):  
New York ◽  
Stock Price ◽  
Price Discovery ◽  
Stock Exchange ◽  
Equity Markets ◽  
Price Volatility ◽  
Short Term ◽  
Major Index ◽  
Short Period ◽  
The Individual

Trading friction leads into accentuated stock price volatility over the short term. As such, short-term accentuated volatility can be viewed as symptomatic of a market with increased inefficiencies in the price discovery process. If price discovery is marked by price swings, runs and reversals, then short period (intra-day) volatility is heightened in that market. In this study, we use return series with various differencing intervals that are as short as half-hour and as long as two weeks to investigate the short-term volatility accentuation in five different equity markets: the Nasdaq Stock Market and the New York Stock Exchange in the US, and the London Stock Exchange, Deutsche Boerse and Euronext Paris in Europe. In all these markets, we investigate the individual stocks that make up a major index during the calendar year 2000. Variance-ratio statistics are employed to investigate the quality of these five markets. Results confirm an intra-day reverse J-shaped pattern of half-hour volatility in these markets. The evidence also suggests an accentuation of volatility during longer periods, such as 24-hour intervals. This accentuation appears to subside when we extend our differencing interval to longer periods such as one-week or two-week returns.

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