Financial Market Structure and the Ergocicity of Prices
The properties of prices, especially with respect to initial conditions related to market startup and unusual shocks to the market environment, are of concern to regulators assessing alternative financial market structures. A natural way to investigate the importance of initial conditions is to evaluate the ergodicity of the price process. A consistent nonparametric test for ergodic failure is introduced for this purpose. We compare the ergodic properties of prices across (i) a computerized market, characterized by an electronic limit order book and a separate batch opening protocol; and (ii) a traditional open-outcry floor market. The work is enabled in part by unusual matched high-frequency trading data on identical financial instruments traded in both markets over the same 24-hour period.
|Date of creation:||1997|
|Date of revision:|
|Contact details of provider:|| Postal: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Madhavan, Ananth, 1995. "Consolidation, Fragmentation, and the Disclosure of Trading Information," Review of Financial Studies, Society for Financial Studies, vol. 8(3), pages 579-603.
- Domowitz, Ian & El-Gamal, Mahmoud A., 2001.
"A consistent nonparametric test of ergodicity for time series with applications,"
Journal of Econometrics,
Elsevier, vol. 102(2), pages 365-398, June.
- repec:fth:inseep:9630 is not listed on IDEAS
- Domowitz, Ian & Wang, Jianxin, 1994. "Auctions as algorithms : Computerized trade execution and price discovery," Journal of Economic Dynamics and Control, Elsevier, vol. 18(1), pages 29-60, January.
- Quah, Danny, 1997. "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," CEPR Discussion Papers 1586, C.E.P.R. Discussion Papers.
- Domowitz, Ian & El-Gamal, Mahmoud A., 1993.
"A Consistent Test of Stationary-Ergodicity,"
Cambridge University Press, vol. 9(04), pages 589-601, August.
- Catherine Bonser-Neal, 1996. "Does central bank intervention stabilize foreign exchange rates?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 43-57.
- Domowitz, Ian, 1990. "The mechanics of automated trade execution systems," Journal of Financial Intermediation, Elsevier, vol. 1(2), pages 167-194, June.
- Ananth N. Madhavan, .
"Trading Mechanisms in Securities Markets,"
Rodney L. White Center for Financial Research Working Papers
16-90, Wharton School Rodney L. White Center for Financial Research.
- Eckstein, Zvi & Foulides, Costas & Kollintzas, Tryphon, 1991. "On the Many Kinds of Growth," CEPR Discussion Papers 592, C.E.P.R. Discussion Papers.
- Pedro Delicado & Iolanda Placencia, 1997. "Comparing and validating hypothesis test procedures: Graphical and numerical tools," Economics Working Papers 210, Department of Economics and Business, Universitat Pompeu Fabra.
- Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-31, March.
- Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
- Granger, Clive W J, 1995. "Modelling Nonlinear Relationships between Extended-Memory Variables," Econometrica, Econometric Society, vol. 63(2), pages 265-79, March.
- Quah, Danny T, 1997. " Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," Journal of Economic Growth, Springer, vol. 2(1), pages 27-59, March.
When requesting a correction, please mention this item's handle: RePEc:att:wimass:9719. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ailsenne Sumwalt)
If references are entirely missing, you can add them using this form.