New Economics Papers
on Market Microstructure
Issue of 2011‒08‒02
two papers chosen by
Thanos Verousis

  1. A Map of the Brazilian Stock Market By Leonidas Sandoval Junior
  2. Trading and rational security pricing bubbles By Jean-Marc Bottazzi; Jaime Luque; Mario R. Pascoa

  1. By: Leonidas Sandoval Junior
    Abstract: We use the correlation matrix of stocks returns in order to create maps of the S\~ao Paulo Stock Exchange (BM&F-Bovespa), Brazil's main stock exchange. The data reffer to the year 2010, and the correlations between stock returns lead to the construction of a minimum spanning tree and of asset graphs with a variety of threshold values. The results are analised using techniques of network theory.
    Date: 2011–07
  2. By: Jean-Marc Bottazzi; Jaime Luque; Mario R. Pascoa
    Abstract: Securities markets theory includes repo and distinguishes shorting from issuing. Here we revisit whether trading alone can give rise to Ponzi schemes and rational bubbles. We show that under the same institutional arrangements that limit re-hypothecation (e.g., through segregated haircut rules or explicit leverage constraints on haircut collecting dealers), (1) trading Ponzi schemes are prevented without having to assume uniform impatience, (2) for securities in positive net supply, bubbles are ruled out under complete markets but may occur when markets are incomplete. We give an example of such a bubble, under a finite present value of wealth.
    Keywords: Repo, Short sale, Bubble, Repo specialness, Ponzi scheme, Leverage
    JEL: C62 D52 D53 D90 G12
    Date: 2011–05

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