Stock Market Liquidity.Determinants and Implications
In this paper, I analyze the economic forces that drive liquidity in stock markets. Liquidity is a key element for well-functioning stock markets as it has important repercussions for traders, trading venues (stock exchanges or alternative trading systems) and listed finns. Moreover, also the stability of tile financial system as whole benefits from liquidity, I first provide a definition of liquidity. Subsequently, several dimensions of liquidity within one market are analyzed. Next to order processing costs, inventory and asymmetric information, the relation between market design and liquidity is studied as well. Finally, I investigate the impact of intermarket competition on liquidity, I not only consider competition between stock exchanges, but also include alternative trading systems.
Volume (Year): LII (2007)
Issue (Month): 2 ()
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