STAT244.Lecture.03 8

STAT244.Lecture.03 8 - volume is higher and transaction...

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Questions/General observation: I How prices adjust to new information? I How the trading mechanism affects asset prices? I Do prices in one market affects the other? I Market micro structure deals with models of asymmetric information. I Informed VS noise or liquidity traders— not distingushiable. I When the proportion of noise traders is large, prices adjust more quickly,
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Unformatted text preview: volume is higher and transaction rates are higher. I Liquidity: ability to trade large volume without impacting the price; bid-ask spread is a measure of liquidity; wider the sperad, higher the corr of transacting. I Price impact of a trade can be measured by quote revisions....
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