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Dispersed Trading and the Prevention of Market Failure: The Case of the Copenhagen Stock Exchange

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Author Info

  • Porter, David C.

    ()
    (College of Business and Economics)

  • Tanggaard, Carsten

    ()
    (Department of Business Studies, Aarhus School of Business)

  • Weaver, Daniel G.

    ()
    (Department of Finance)

  • Yu, Wei

    ()
    (Department of Finance)

Registered author(s):

    Abstract

    With augmented demands on power grids resulting in longer and larger blackouts combined with heightened concerns of terrorist attacks, trading institutions and policy makers have widened their search for systems that avoid market failure during these disturbing events. We provide insight into this issue by examining trading behavior at the Copenhagen Stock Exchange during a major blackout. We find that although market quality declined, markets remained functional and some price discovery occurred during the blackout period suggesting that the NOREX structure of interlinked trading systems combined with widely dispersed trading locations may be a viable means of protection against market failure during massive power disruptions or terrorist attacks.

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    File URL: http://www.hha.dk/bs/wp/fin/F_2006_07.pdf
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    Bibliographic Info

    Paper provided by University of Aarhus, Aarhus School of Business, Department of Business Studies in its series Finance Research Group Working Papers with number F-2006-97.

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    Length: 43 pages
    Date of creation: 04 Jan 2006
    Date of revision:
    Handle: RePEc:hhb:aarbfi:2006-97

    Contact details of provider:
    Postal: The Aarhus School of Business, Fuglesangs Allé 4, DK-8210 Aarhus V, Denmark
    Fax: + 45 86 15 19 43
    Web page: http://www.asb.dk/about/departments/bs.aspx
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    Related research

    Keywords: Power failure; Fragmented markets; Market failure;

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    1. William G. Christie & Shane A. Corwin & Jeffrey H. Harris, 2002. "Nasdaq Trading Halts: The Impact of Market Mechanisms on Prices, Trading Activity, and Execution Costs," Journal of Finance, American Finance Association, vol. 57(3), pages 1443-1478, 06.
    2. Joanne Hamet, 2002. "Is Off-Board Trading Detrimental to Market Liquidity?," The Financial Review, Eastern Finance Association, vol. 37(3), pages 385-402, 08.
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