New Economics Papers
on Market Microstructure
Issue of 2014‒07‒21
three papers chosen by
Thanos Verousis

  1. Technology Upgrades in Emerging Equity Markets: Effects on Liquidity, Trading Activity and Volatility By M. Kemal Yilmaz; Orhan Erdem; Veysel Eraslan; Evren Arik
  2. Slow decay of impact in equity markets By X. Brokmann; E. Serie; J. Kockelkoren; J. -P. Bouchaud
  3. Arbitrage in markets with bid-ask spreads By Przemys{\l}aw Rola

  1. By: M. Kemal Yilmaz; Orhan Erdem; Veysel Eraslan; Evren Arik
    Abstract: This study examines the effects of technological changes on selected stock market qualities such as liquidity, turnover and volatility. The data set includes daily data of 361 stocks from 10 emerging market exchanges, namely Colombia, Indonesia, Johannesburg, Korea, Malaysia, Mexico, Russia, Shanghai, Shenzhen and Thailand. The analysis is based mainly on the comparison between the pre- and post-launch of a new trading platform for equity markets. A panel data regression analysis shows that technological upgrade decreases the bid-ask spread and increases trading activity. In other words, launching a more sophisticated trading platform contributes to the overall efficiency of the market. Moreover, we find that, in some exchanges, an important upgrade in the technological infrastructure of the exchange decreases its level of volatility.
    Keywords: Market Microstructure, Technological Upgrade, High Frequency Trading, Emerging Markets, Liquidity
    Date: 2014–06
  2. By: X. Brokmann; E. Serie; J. Kockelkoren; J. -P. Bouchaud
    Abstract: Using a proprietary dataset of meta-orders and prediction signals, and assuming a quasi-linear impact model, we deconvolve market impact from past correlated trades and a predictable return component to elicit the temporal dependence of the market impact of a single daily meta-order, over a ten day horizon in various equity markets. We find that the impact of single meta-orders is to a first approximation universal and slowly decays to zero (or to a small value), possibly as a power-law. We show that auto-correlated order-flows and trade information contents fully accounts for the apparent plateau observed in the raw data. We discuss the possible bias introduced by the quasi-linear assumption.
    Date: 2014–07
  3. By: Przemys{\l}aw Rola
    Abstract: In this paper a finite discrete time market with an arbitrary state space and bid-ask spreads is considered. The notion of an equivalent bid-ask martingale measure (EBAMM) is introduced and the fundamental theorem of asset pricing is proved using (EBAMM) as an equivalent condition for no-arbitrage. The Cox-Ross-Rubinstein model with bid-ask spreads is presented as an application of our results.
    Date: 2014–07

This issue is ©2014 by Thanos Verousis. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.