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Information Technology and Trader Competition in Financial Markets: Endogenous Liquidity

Author

Listed:
  • Sanjeev Dewan

    (Graduate School of Management, University of California, Irvine, California 92697)

  • Haim Mendelson

    (Graduate School of Business, Stanford University, Stanford, California 94305-5015)

Abstract

This note integrates the models of Dewan and Mendelson (1998) (DM) and Kyle (1985), extending the DM analysis of time-based competition in financial markets to the case of endogenous liquidity. The results enable us to examine the link between information technology investments, trading strategies, and liquidity.

Suggested Citation

  • Sanjeev Dewan & Haim Mendelson, 2001. "Information Technology and Trader Competition in Financial Markets: Endogenous Liquidity," Management Science, INFORMS, vol. 47(12), pages 1581-1587, December.
    • Handle: RePEc:inm:ormnsc:v:47:y:2001:i:12:p:1581-1587
    DOI: 10.1287/mnsc.47.12.1581.10241
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    File URL: http://dx.doi.org/10.1287/mnsc.47.12.1581.10241
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    References listed on IDEAS

    as
    1. Sanjeev Dewan & Haim Mendelson, 1998. "Information Technology and Time-Based Competition in Financial Markets," Management Science, INFORMS, vol. 44(5), pages 595-609, May.
    2. Holden, Craig W & Subrahmanyam, Avanidhar, 1992. "Long-Lived Private Information and Imperfect Competition," Journal of Finance, American Finance Association, vol. 47(1), pages 247-270, March.
    3. Madhavan, Ananth, 1992. "Trading Mechanisms in Securities Markets," Journal of Finance, American Finance Association, vol. 47(2), pages 607-641, June.
    4. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
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    Cited by:

    1. Bruno Biais & Christophe Bisière & Sébastien Pouget, 2014. "Equilibrium Discovery and Preopening Mechanisms in an Experimental Market," Management Science, INFORMS, vol. 60(3), pages 753-769, March.
    2. Maxim Afanasyev & Haim Mendelson, 2010. "Service Provider Competition: Delay Cost Structure, Segmentation, and Cost Advantage," Manufacturing & Service Operations Management, INFORMS, vol. 12(2), pages 213-235, May.
    3. Rajiv D. Banker & Robert J. Kauffman, 2004. "50th Anniversary Article: The Evolution of Research on Information Systems: A Fiftieth-Year Survey of the Literature in Management Science," Management Science, INFORMS, vol. 50(3), pages 281-298, March.
    4. Kasing Man & Junbo Wang & Chunchi Wu, 2013. "Price Discovery in the U.S. Treasury Market: Automation vs. Intermediation," Management Science, INFORMS, vol. 59(3), pages 695-714, September.

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