Investors’ Interacting Demand and Supply Curves for Common Stocks*

Dierker, Martin; Kim, Jung-Wook; Lee, Jason; Mørck, Randall

doi:10.1093/rof/rfv042

Cited by 8 publications

(5 citation statements)

References 61 publications

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“…A growing literature studies elasticities in global financial markets, see for instanceDierker et al (2016) andCharoenwong et al (2020).4 See alsoEdelen and Warner (2001),Goetzmann andMassa (2003), andBen-Rephael et al (2012).5 Deuskar and Johnson (2011a) study a system of equations in which flows may impact returns and returns may impact flows. To identify price impact, they rely on identification via heteroskedasticity as inRigobon (2003).…”

mentioning

confidence: 99%

In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis

Gabaix¹,

Koijen²

2020

SSRN Journal

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mentioning

confidence: 99%

In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis

Gabaix¹,

Koijen²

2020

SSRN Journal

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“…However, empirical evidence supports individual stocks having downward sloping demand curves (Dierker et al 2016), so the BOJ's policy could plausibly affect stock prices by increasing demand.…”

Section: Identification Via the Mechanics Of Boj Equity Index Etf Purmentioning

confidence: 99%

“…If information is costly and distributed heterogeneously across investors (Grossman and Stiglitz 1980;Hong and Stein 2007;Dierker et al 2016) or if investors are heterogeneously impatient (Handa and Schwartz 1996)) and liquidity providers compete imperfectly (Sandas 2001), stocks have finite demand elasticities. In such a setting, the BOJ increases the prices of these stocks.…”

Section: Economic Motivationmentioning

confidence: 99%

Bank of Japan Equity Purchases: The (Non-)Effects of Extreme Quantitative Easing*

2020

Self Cite

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From January 2011 through March 2018, the Bank of Japan purchased equity index ETFs worth about 3.5% of GDP. Identification of the effect of central bank ETF purchases on stock valuations and corporate responses is via differently-weighted and changing stock indices. BOJ purchases lift valuations, increase share issuances, and increase total assets. On average, the latter increase is due to cash and short-term securities rather than capital investment. However, firms with worse corporate governance do increase capital investment. These findings suggest central bank equity purchases are a problematic tool for stimulating economic growth through high broad-based private-sector corporate investment.

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“…Most of the literature on liquidity, including that on LOBs, measures it in terms of spread and depth computed with price and volume information from the best bid-ask orders [Chordia et al (CRS) [20] 2000, 2002. More recent evidence from the developed markets suggests that these orders may be noisy and informationally less efficient (Amaya et al, 2018;Cao et al, 2009;Cenesizoglu and Grass, 2018;Deuskar and Johnson, 2011;Dierker et al, 2015;Domowitz et al, 2005;Kempf and Mayston, 2008) [21]. Therefore, the price and volume information from the deeper levels of order book may be required to assess the state of liquidity accurately.…”

Section: Liquiditymentioning

confidence: 99%

“…The best orders in LOBs, unlike in dealer markets, maybe noisy and informationally less efficient. There is evidence that the informed traders prefer the deeper levels of LOB to conceal private information, as evident from the low volumes of the best orders (Amaya et al, 2018;Cao et al, 2009;Cenesizoglu and Grass, 2018;Deuskar and Johnson, 2011;Dierker et al, 2015;Domowitz et al, 2005;Kempf and Mayston, 2008) [28]. Therefore, the examination of order book at deeper levels may offer interesting insights, especially into the functioning of the hitherto less explored emerging markets.…”

Section: Insights Research Gaps and Scope For Future Researchmentioning

confidence: 99%

Limit order books: a systematic review of literature

Tripathi

Vipul

Dixit

2020

QRFM

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Purpose This study aims to provide a systematic literature review of the research study in the area of limit order book (LOB) mechanism of trading and its implications for market efficiency. The study attempts to document the recent theoretical developments and empirical findings from the literature exhaustively and identifies the research gaps for future research. Design/methodology/approach The study uses seven reputable databases to select 2,514 research studies spanning over 1981-2018 (finally compressed to a pool of 103 articles, based on relevance and impact). The study uses bibliometric network visualization and text analytics to categorize and examine the literature. The chosen articles are compiled and analyzed to provide a comprehensive account of the current research on LOBs. Findings The recent LOB literature is summarized on various criteria as follows: sub-areas, the types of economies and markets, methodologies and the LOB measures. The review identifies a dearth of studies on the LOBs in emerging markets. It suggests the potential research areas as intraday studies in emerging LOB markets; application of market indicators based on deeper levels of LOB, beyond the best prices; market fragmentation, order routing decision and its impact on order execution quality; optimal display of LOB levels; liquidity dynamics in quote-driven markets vis-à-vis LOB markets; effect of high-frequency trading on market microstructure; application of advanced techniques (e.g. machine learning models, zero-intelligent models); relationship between the trading speed, order aggressiveness, shape and resilience of the order book and informed trading; and information content of the auxiliary order submission strategies, including cancellation, amendments and hidden orders. Originality/value For the past 15 years, to the best of the knowledge, a comprehensive review of the literature on LOBs has not been published. The financial markets have transformed significantly over this period, driven by the adoption of LOBs, low latency trading and technological advancements in information dissemination. This article provides an extensive collection and classification of the literature on LOBs. This would be useful for the practitioners, future researchers and academics in the area of financial markets.

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Investors’ Interacting Demand and Supply Curves for Common Stocks*

Cited by 8 publications

References 61 publications

In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis

In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis

Bank of Japan Equity Purchases: The (Non-)Effects of Extreme Quantitative Easing*

Limit order books: a systematic review of literature

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