This paper examines liquidity externalities by analyzing trading costs after hours. There is less than 1/20 as many trades per unit time after hours as during the trading day. The reduced trading activity results in substantially higher trading costs: quoted and effective spreads are three to four times larger than during the trading day. The higher spreads reflect greater adverse selection and...

This paper proposes that electronic marketplaces for Web 3.0 can be described through three metaphors: “marketplaces where people are”, “marketplaces that are alive and engaging”, and “market places where information is valuable and useful”. The paper presents the core technologies that enable the perceivable reality of electronic marketplaces. It describes a demonstrable prototype of a Web-bas...

We study the consequences of indexing, i.e. commiting to invest in risky assets only via the market portfolio. We extend the canonical rational expectations model (Grossman and Stiglitz, 1980) to allow for multiple assets and endowment shocks, and show that indexing imposes a negative externality on other uninformed agents. More indexing makes informed trading on the market more profitable, whi...

Although brokers’ trading is endemic in securities markets, the form of this trading differs between markets. Whereas in some securities markets, brokers may trade with their customers in the same transaction (simultaneous dual trading or SDT), in other markets, brokers are only allowed to trade after their customers in a separate transaction (consecutive dual trading or CDT). We show theoretic...

This paper describes an agent-based model of financial markets with monopolistic or competitive market-makers and analyzes some of the emergent properties of these markets, including time series properties. The artificial markets we discuss utilize models of “informed” trading agents who decide to trade based on received signals of the true or fundamental value of the stock, and “uninformed” tr...

In the presence of asymmetric information, stock trading is particularly affected when market participants are prohibited from short selling. Although insiders privy to negative information may not exploit this information by selling if they do not own the stock, the market maker can deduce the occurrence of bad news by observing the trading patterns. Prices are shown to rise on high volume aft...

The last decade has witnessed a dramatic increase in both the number and the market share of screen-based trading systems. Electronic trading systems do offer lower operating costs and the possibility of remote access to the market. On the other hand, arguments based on the anonymity of electronic trading systems suggest that adverse selection may be a more severe problem and that, therefore, b...

0378-4266/$ see front matter 2012 Elsevier B.V. A http://dx.doi.org/10.1016/j.jbankfin.2012.09.012 ⇑ Corresponding author at: Faculty of Business Ad versity, 955 Oliver Road, Thunder Bay, ON, Canada P7 fax: +1 807 343 8443. E-mail addresses: [email protected] (N. (R. Gençay). From the market microstructure perspective, technical analysis can be profitable when informed traders make systemat...

Many organizations make extensive use of electronic linkages to facilitate their trading exchanges with partners such as suppliers, distributors and customers. This research explores how the use of inter-organizational systems both affect, and are affected by, the relationships between trading partners. In doing this, it brings together two existing but distinct perspectives and literatures; th...