Accurate liquidity measurement is important for liquidity timing and order routing. One of the most prevalent measures is the effective spread, defined as the percentage difference between the transaction price and the bid-ask spread midpoint. In a paper recently accepted for publication in Journal of Financial Economics, I challenge the use of the spread midpoint to gauge the fundamental value when measuring the effective spread. I show that the use of the midpoint leads to an overestimation of the “true” effective spread.
I am one of the organizers for a new online seminar series in market microstructure -- The Microstructure Exchange. We plan to have academic webinars every Tuesday, featuring the latest research on financial market structure. For more information and registration, the website is at https://microstructure.exchange/
Jag skriver på DI Debatt (20 mars) att förslag om blankningsförbud och börsstängning som kommer nu i Covid19-krisen bör avvisas. Här lite extramaterial, som inte fick plats i tidningen. Bakgrund Blankningsförbud har den senaste veckan införts i Sydkorea, Spanien, Frankrike, Italien och Belgien (Bloomberg, FT) Jag har inte sett att någon börs stängt helt, men NYSE… Continue reading Stäng inte börsen
At the opening of US equity markets on August 24, 2015, prices dropped sharply following overnight turmoil in global markets. In the minutes after opening, large order imbalances triggered circuit breakers to halt trading in numerous stocks and exchange-traded funds. More than a thousand securities were affected and hundreds of them experienced repeated trading halts… Continue reading Auction volatility safeguards
On May 4-5, together with Albert Menkveld I organized the Conference on the Econometrics of Financial Markets at Stockholm Business School. The conference celebrated the 20th anniversary of an influential book on financial econometrics, published in 1997 by John Campbell, Andrew Lo, and Craig MacKinlay. The conference featured keynote speeches by John Campbell and Andrew Lo,… Continue reading Celebrating Campbell-Lo-MacKinlay
When the trading of a security is fragmented across exchanges, MTFs, and dark pools, the prices at different markets co-move almost instantaneously. Almost. What happens in the time span specified as almost instantaneous? Once new information appears at one market, how does it spread to the other markets trading the same security? Information percolation describes how information spreads… Continue reading A network map of information percolation
Lyssna på Vetandets Värld om hur "börsrobotarna" påverkar dagens aktiehandel! http://sverigesradio.se/sida/avsnitt/549882?programid=412