Trading Frictions and Market Structure: An Empirical Analysis
Market structure affects the informational and real frictions faced by traders in equity markets. We present evidence which suggests that while real fric- tions associated with the costs of supplying immediacy are less in order driven systems, informational frictions resulting from increased adverse selection risk are considerably higher in these markets. Firm value, transaction size and order location are all major determinants of the trading costs faced by investors. Consistent with the stealth trading hypothesis of Barclay and Warner (1993), we report that informational frictions are at their highest for small trades which go through the order book. Finally, while there is no doubt that the total costs of trading on order-driven systems are lower for very liquid securities, the inherent informational inefficiencies of the format should be not be ignored. This is particularly true for the vast majority of small to mid-size stocks that experience infrequent trading and low transac- tion volume.
SETS SEAQ Trading Friction Market Structure
Charlie X. Cai David Hillier Robert Hudson Kevin Keasey
Leeds University Business School, Maurice Keyworth Building, The University of Leeds, Leeds LS2 9JT, University of Leeds
国际会议
西安
英文
1-38
2006-07-17（万方平台首次上网日期，不代表论文的发表时间）