Index#

adjustments, 153, 171, 271

Admati, A., 131–41, 161, 210, 212–13, 227

Admati-Pfleiderer models, 144–8, 191, 243–5, 262, 265

adverse selection problem, 67, 193

agents, 89, 180, 206. See also traders

aggregate order flow, 92, 96, 100, 157

aggregate trades, 91, 92, 143, 254

Akerlof, G., 65, 181

Allen, B., 123

Amihud, Y., 23, 29, 51, 188

anonymity, 252–3, 260–8

arbitrage, 11, 234n8, 240, 243, 249–50

Arizona Stock Exchange, 8, 190, 268 ask prices, 15, 20, 45, 147, 186. See also bid prices; bid and ask prices ask prices, 15, 20, 45, 147, 186. See also bid prices; bid and ask prices asset markets, 154, 268

assets, 156, 206–7, 219; and risk, 124, 125, 156, 165, 217; value of, 66, 79, 99, 103, 105, 125, 146, 154, 182, 198

asymmetric information, 54, 57–8, 65, 77, 188, 192, 227, 269; analysis of, 71–2; and bid-ask spread, 66; and market behavior, 73; and monopoly, 182; and volume, 162 auction mechanisms, 15, 49n22, 91-100

automated trading systems, 8, 180-1, 190, 197, 251, 258, 260

average prices, 147–8, 182, 187, 195

Back, K., 100, 102n5, 103–5, 248n11

Bagehot, W., 53, 56, 72, 236

bankruptcy, 16–17, 23, 26, 28, 31

basket securities, 216, 246–7

batch clearing models, 91

batch markets, 255

batch style models, 154ff, 169n7

batch trades, 89, 90, 92, 107, 131, 188, 197, 254

Bayes Rule, 61, 64, 68, 70, 77ff, 77–88, 92, 94, 95, 101, 143, 171, 183–4, 211, 249

beliefs, 64, 77, 82, 98, 99, 200

Bellman equation, 31, 104, 104n7

Bhattacharaya, U., 113n12, 185n3

Biais, B., 49n22, 248n11, 253, 258n3

bid and ask adjustments, 31, 32 bid and ask prices, 23, 28, 29, 31, 33, 38, 41, 81; behavior of, 61, 145; and dealer inventory positions, 51; setting of, 114; and time; 169, 173

bid-ask spread, 54, 65, 73 bid prices, 15, 20. See also ask prices; bid and ask

Black, F., 65, 198, 202, 248n11 block trades, 8, 70–2, 130, 215–16, 223, 233–43. See also large trade

Blume, L.E., 3, 113, 124, 161, 165-7

Bolsa (Mexico City), 12 book. See hole in the book; limit orders, book of; specialists, book of orders, book of; specialists, book of Bourse (Paris), 12, 179

Bradfield, J., 37n16

Bray, M.M., 3

break even prices, 69, 185

Brennan, M.J., 206n19

Brown, D.P., 156–60, 163–6

Brownian motion, 101, 103–5

Burdett, K., 234–9

buy and sell operators, 34

buy and sell orders, 15–17

buy imbalance, 5, 98

buying fees, 48–9 call markets, 10, 38, 103, 143–4, 179, 188–9

Campbell, J., 161

cash failure probability, 20, 22

cash flow, 20n3, 39–40

cash position, 18, 22

CATŠ (Toronto), 180, 194

Chang, E.C., 262

Chowdhry, B., 227–32, 244

Cincinnati Exchange, 190n7, 197

circuit breakers, 11, 65

clumping behavior, 137, 139, 147

Cohen, K., 13, 45–6, 192

commissions, 144–9, 235, 238–9

commitment prices, 235–6, 239

Commodity Exchange Act, 268

compensation, 25, 27, 31, 70

competition, 137, 154, 268

competitive behavior, 58, 60, 64, 67–8, 74, 187, 198, 267; and traders, 47, 48, 106, 108, 110, 144, 183; and trades, 60, 187

competitive markets, 27n5, 44–50, 146, 169, 179, 186–7

conditional expectations, 92, 93, 96, 155, 162–5, 179, 182, 183, 185 conjecture, 163, 224–6

contemporaneous data, 164–5

continuous auctions, 10, 91, 101, 140, 153, 179, 254n2

continuous markets, 103, 188, 208, 253, 255–6

continuous time models, 32, 104–5

continuous trades, 38, 103

convergence, 73, 82, 86, 202n16, 223

Copeland, T., 54–9 passim, 64, 66, 197

Cox process, 30n10

Dann, L.Y., 66

dealers, 15, 28, 31–7, 44, 49, 255; optimizing behavior of, 25; preferred inventory position of, 51; and pricing, 40, 48, 49; problems of, 24, 25–9, 38, 43–4

DeLong, J.B., 205n18

demand functions, 5, 55–6, 114, 162

Demsetz, H., 5–6, 13, 22, 44

derivative instruments, 216, 243, 248

Designated Order Turnaround System, 11

Diamond, D.W., 62n7, 156n2, 169–76passim, 201

differential costs, 226

differential equilibrium, 185

differential information, 119

discounts, 237-8

discrete time models, 104, 105, 140 discrete time multiperiod models, 37, 44

discretionary traders, 132–6, 139, 141, 145–8, 245–6

dividends, 31, 161–2

Diz, 177n11

Domowitz, I., 268

Dow Jones Industrial Average, 11

downstairs markets, 239–40

dual trades, 260, 262–7

dynamic behavior of markets, 24, 37, 241, 270

dynamic programming, 29, 218

Easley, D., 3, 57, 113, 124; and market stability, 192–3, 198, 201–3, 250n12; and speed of adjustment, 201, 203; and stop orders, 198–9; and time, 169–75passim

Easley-O'Hara models, 28n7, 62n7, 65, 66–72, 161, 165–7, 242

economies, 1, 123–4, 163

Edgeworth box, 119, 121

efficiency of markets, 1, 64, 65, 73, 143, 154, 180, 201, 270. See also price(s), efficiency of

electronic markets: See automated trading systems

endowments, 125, 139, 158–9, 164, 182–3, 226; and shock, 218, 223

entropy, 85–6, 171–2, 201

equilibrium, 3, 60, 66–9, 113, 142, 163, 253, 257; imperfect competitive, 116; in Kyle models, 91–4, 101; and linearity, 97–8, 139; nature of, 89; properties of, 47, 93, 113ff, 150–1, 155, 159, 222; and Walrasian auctioneer, 4222; and Walrasian auctioneer, 4 equilibrium prices, 3-5, 92, 166, 206, 208; defined, 14

equity markets, 7, 9, 218

exchange processes, 6–15, 15

existence uncertainty, 71-2

expected profits, 102, 147, 185, 194

expected values, 64, 184, 208, 255

Fama, E., 64n8

finite horizon models, 30, 36–7

Finucane, 177n11 hidden trades, 11, 93, 103, 129–30, 256

Fishman, M., 253, 260, 262, 265–7

Hillion, P., 248n11

floor brokers, 202-3

Hinderer, 29n9

foreign exchanges (FX), 7, 8, 49, 144, 222

Ho, T., 13, 28n8, 29, 31-49passim, 104n7

Forster, M., 253, 260–1

Holden, C.W., 106, 109–12, 113n11

Foster, F.D., 99n4, 106, 109, 130, 140-2

hole in the book, 46, 196. See also specialists, book of

free options, 197–8, 222, 239, 257

French, K.R., 130, 142

Holthausen, R., 66

front runners, 260, 267

Houthakker, H.S., 5

Fudenberg, D., 151

full information values, 67, 73, 82, 90, 96, 100, 154, 173; and equilibrium, 62, 109; and prices, 92, 158

immediacy, 25, 44, 47; cost of, 5–6, 27, 221

inference, 184, 209

futures markets, 64, 90, 173n9, 216, 218

infinity, and trades, 111–12, 145

FX. See foreign exchanges

gains, 67, 146, 182, 185, 251, 255

Galai, D., 54–9 passim, 64, 66, 197 information, 53, 98, 103, 104, 106, 109, 137, 148, 154, 166, 252; life of, 132, 141, 145; and market viability, 181–91; and multiple markets, 243–50; and prices, 101, 107–8, 119, 180, 200; and time, 102, 111, 153ff, 258; and trades, 57, 59, 74, 98; and volume, 160ff

Gallant, A.R., 167

game theoretic approach, 50, 130, 135

Gammill, J.F., 182n257, 59, 74, 98; and volume, 160ff information based models, 53–88, 65, 67–8, 106–7, 162, 181

Garman, M., 13, 14–18, 20–4 passim, 29, 31, 62n6

Gemmill, G., 259n5 information based trading strategies, 89, 185

Gennotte, G., 205–6, 208–9

information events, 66-7

George, T., 253, 260-1

Globex, 8, 180, 268 information monopolist, 90, 92, 113. See also monopolistic dealers

Glosten, L., 57, 138n2, 171n8, 181–7, 190, 254

information uncertainty, 66

Glosten-Milgrom models, 58-66, 70, 143, 169-74 passim, 189-90, 193 informed agents, 61

informed speculators, 114

gravitational pull, 47, 50, 192

Grossman, S.J., 24n4, 125, 154, 156n2, 161, 206, 210, 221; and block trades, 234, 239–40; and liquidity, 217–18

informed traders, 37, 53–7, 58, 62, 65,

Grundy, B.D., 156, 158–60, 163–5, 185n3 mx

informed traders, 37, 53–7, 58, 62, 65, 71, 74, 89ff, 106–12, 134, 141, 145, 155, 174; decision problem of, 68, 145; endogeneity of, 107, 136; and large quantity, 67–9; order strategy of, 96, 98, 105, 138; strategic behavior of, 90–106, 136, 140

Hakansson, N.H., 42

initial positions, 26, 31, 200

Harris, L., 65, 142, 192n9

instantaneous quotes, 35, 55

Harris, M., 161

Instinet, 8, 190

Hasbrouck, J., 24, 28n6, 51, 65, 73n9, 177, 192n9

institutional traders, 8, 180, 186n4, 241-2, 259

Hausman, J.A., 177

insurance trades, 199, 235

hedging strategy, 137–9, 205–6, 208–9, 270–1

interdealer markets, 47, 49

Hellwig, M.F., 156n2, 165

Intermarket Trading System (ITS), 11, 197, 258n4

Hicks, J.R., 3n1

intertemporal behavior, 22, 29, 182n2 inventory, 16, 21–3, 26, 28, 31, 36, 59, 196–7, 217; intertemporal role of, 29–44

inventory models, 13–52, 50–2, 217–18, 240

inventory position, 39, 43

inventory processes, 17, 23

inventory risks, 35, 36

inventory value, 31, 43

Ito's Lemma, 32

ITS. See Intermarket Trading System

Jacklin, C.J., 205, 209

Jackson, M., 113

Jain, P.C., 130

Jennings, R., 156–60, 163–6, 173n9

Joh, G.-H., 130

John, K., 249n11

Jordan, J., 123-4, 163n5, 208n21

jump properties, 45–6, 208

Karpoff, J., 160

Keynes, J.M., 205, 216

Kim, O., 160-2

Kleidon, A.W., 205, 209

Koticha, A., 248n11

Kumar, P., 248–9

Kyle, A.S., 89, 90–116 passim, 224, 227, 230

Kyle models, 77, 90ff, 106–16, 131ff, 131–40passim, 155, 184, 216, 243, 254, 261

large trades, 67–72, 96, 104, 185–7, 186n4, 226, 234ff. See also block trades

Laux, P.A., 52

Leach, J.C., 182n2, 202n16, 250

learning problems, 86, 92, 184 learning process, 64, 77, 91, 161, 165, 180, 237

Lee, C.M.C., 177, 190n7

Leftwich, R., 66

Leland, H., 205-6, 208-9

Leroy, 64n8

limit behavior, 73, 75, 111, 153, 164 limit orders, 10, 37–9, 41, 45–7, 116n13; book of, 196, 198, 200, 252; and informed traders, 91n1; and market stability, 181, 191–7

Lindsay, R., 9, 12n9, 206n20, 260

linear equilibrium, 102, 107, 110, 116, 130, 139, 140

linear order strategy, 34, 95–6, 101, 138

linear pricing rule, 93, 96, 97, 135, 244

liquidation value, 90, 107, 157

liquidity, 13, 45, 108, 141, 154, 170, 213, 223, 257–8, 270; -based orders, 39, 188; defined, 215–16; and market relationships, 215–50; model of, 24n4; nature of, 216–23; and order flow, 15, 105; supply of, 50, 206

liquidity traders, 54, 59, 90, 131, 136, 145, 183, 210

Lo, A.W., 103n6

loans, 242n9

Locke, P.R., 262

London Stock Exchange, 12, 258-9

Longstaff, F., 253, 260, 262, 265–7

losses, 57, 129–30, 182, 185, 186, 251

Lyons, R., 49, 52

MacKinley, A.C., 103n6, 177

Madhavan, A., 24, 51, 52, 182n2, 187–9, 202n16, 250, 253–5

Madoff Securities, 190

Maier, S., 13, 45–6, 192

Manaster, S., 52

Mann, S.C., 52

market behavior, 6, 129, 199; paradigms used to explain, 2–3, 153, 205

market clearing mechanisms, 13, 15, 124, 168, 253

market clearing prices, 3, 4, 7, 21, 94, 114, 133, 153, 185, 253, 269

market crash, 65, 208–9; of 1987, 11, 180, 205, 209, 243

market design, 73, 181, 251, 268–71

market efficiency. See efficiency of markets; price(s), efficiency of

market information, 153–5

market makers, 15, 20–6, 42, 47, 148–50, 155, 181, 203, 217; beliefs of, 100, 172; decision problem of, 58, 68, 184; learning problem of, 61, 66; and pricing, 68, 89, 90, 138, 245. See alsospecialists

market microstructure, 5, 14, 58, 89; definition of, 1-2; literature of, 113, 119, 124, 161, 171; modeling of, 143, 150; research in, 2, 3, 73, 98, 112, 129, 179, 215

market orders, 10, 45, 116n13; defined, 37; flow of, 39

market performance, 181, 205, 251–71; and liquidity, 223–33

market power, 24, 185 market prices, 7, 13–14, 109, 158 markets, 1, 6–12, 180–1; properties of, 114, 168; transparency of, 252–60

market segmentation, 190

market spread, 46–7, 50

market stability, 11, 179ff, 268

market statistics, 89, 168

market structures: and affect on prices, 153; alternative, 65; issues in, 180, 205–14

market viability, 179ff

Markov process, 23, 45, 72

Martingales, 64, 65, 72, 100, 103, 104, 143, 254

noise traders, 91, 93, 108, 112, 114,

Mayers, D., 66

McInish, T.H., 11, 190n7

McNichols, M., 156, 158–60, 163–5, 185n3

Mendelson, H., 15n1, 23, 29, 51, 188

Merton, R.C., 29n9, 32n13

microstructure. See market microstructure

Milgrom, P., 55n2, 57, 59, 67, 159, 171n8, 181, 185n3. See alsoGlosten-Milgrom models

Miller, M.H., 24n4, 217–18, 221, 239

monopolistic dealers, 41, 50, 56, 106, 109, 144, 180, 182, 183, 187, 239, 259, 269

Nanda, V., 227–32, 244

Nash equilibrium, 114, 225

National Market System, 190n8

Mucklow, B., 177

negative price, 65, 96

monopolistic prices, 35, 186

multiperiod models, 36, 48, 102, 217–18, 240

net order flow, 7, 94, 98, 131, 155, 252

multiple markets, 90, 216, 243–50

new information, 66–7, 71, 103, 153, 174

multiple trades, 57, 100, 101–6, 242

New York Stock Exchange (NYSE), 6, 9–12, 28, 179–80, 182, 187, 190, 197, 232, 258

noise, 140, 182–4, 202, 249

myopic behavior, 157, 166, 199 noisy rational expectations framework, 155–6, 158, 161, 163–4

Oldfield, G., 37, 42, 143, 192

one period models, 35, 48, 50, 54, 114, 130, 132, 166, 182, 193-4, 197, 208n22, 228, 240, 244, 262 nondiscretionary traders, 145–6, 245

normal distributions, 94, 99n4, 123, 182

no trade equilibrium, 59, 67, 175–6, 185n3

Opening Automated Report Service (OARS), 10

one-trade framework, 56

OARS. See Opening Automated Report Service

NYSE. See New York Stock Exchange

optimal bid and ask prices, 27, 56

O'Callaghan, 7n3

optimal inventory position: variability of, 24

O'Hara, M., 37, 42, 57; and block trades, 234–9; and market stability, 192–3, 198, 201–3, 250n12; and stop orders, 198–9; and time, 169–75passim. See also Easley-O'Hara models

optimal order strategy, 90–1, 105, 133

optimal prices, 25, 29, 35–6, 68, 104–5

optimal trades, 93, 103, 110, 193, 235, 257, 266

optimization, 13, 14, 31, 104n7

option pricing models, 56n3, 105n8, 248n11

options, 197, 216

order arrival processes, 14–18, 24, 35, 114, 266

order arrival rates, 16, 22

order driven markets, 253–4

order flow, 13–16, 38, 91–4, 132, 192, 203, 253; behavior of, 37, 104–5; and information, 206, 252, 260; and information-based trades, 55, 188, 190, 202; lessons of, 58, 180; monitoring of, 104, 255

order processing costs, 25 orders, 8, 39, 90, 105, 132, 191; market at close, 191

order strategies, 92, 101, 106, 114, 198, 246

outside customers, 217, 219–20, 238 overnight market, 38, 40, 42

Pagano, M., 223–8, 232, 247, 253, 255–7, 260, 262, 267

patterns, 142, 143ff, 155

Pfleiderer, P., 131–40, 205, 209, 210, 212–13, 227. See also Admati-Pfleiderer models

Poisson processes, 16, 17, 30, 36, 45

policy issues, 98, 251

pooled informed traders, 59, 68, 74

pooling equilibrium, 68–70, 135, 189–91, 242, 257

portfolio insurance, 202, 206

portfolio returns, 29

portfolio risks, 25, 35

portfolio trades, 26–8, 30, 185, 217, 241

POSIT, 8, 190

positive profits, 92, 106, 265

posterior beliefs, 95, 98, 101, 126

posterior means, 95, 100

posterior probability, 77, 81

potential competition, 44n18

preferred inventory positions, 24, 51-2 price adjustments, 75, 77, 82-3, 93,

price adjustments, 75, 77, 82–3, 93, 109, 111, 154, 271; paths of, 65, 74, 203. See also price process

price behavior, 191–204; and call markets, 143–4; and informed traders, 106–12; and risk aversion, 222; and variance, 98

price consumption curves, 119, 120, 122, 123

price contingent orders, 39, 114,

191–2, 202–3. See also limit orders price discovery, 250, 254, 259, 269–70 price elastic demand functions, 55

price formation, 1, 196; traditional view of, 2ff; two traditional approaches to, 3; and Walrasian auctioneer, 4, 114

price process, 46, 153–77

price(s), 1, 3–6, 10, 58, 90, 106, 147, 169, 176, 182, 196; efficiency of, 64, 82, 103, 108, 110, 153, 158; and information, 2, 107–8, 112, 119, 153ff; and order flow, 22, 109, 133; revelation of, 136, 154, 163; sequence of, 154, 155, 157, 204; setting of, 4, 6, 13, 24–9, 31–2, 58, 205; and size of trade, 70, 101; stability of, 11, 204; and time horizons, 153ff; and volume, 160–77

pricing policies: changes in, 43

pricing problem: complexities of, 44

pricing rules, 92, 97, 104, 125, 185-6

private information, 67, 89, 90, 92, 93, 107, 109, 145, 156, 180, 268; and traders, 129, 132, 136

private investments, 161-2

private signals, 157, 198, 206

probabilistic trades, 45, 55, 59, 62, 67, 74, 170

probability structure of trade, 63 proceeds constraints, 169, 173

profits, 15, 21, 42, 69, 145–6; and information, 107, 194;

maximization of, 22, 24, 89, 107 public information, 47, 107, 132, 140, 142, 161

queues, 58, 74, 175

quotes, 187, 253-4

Raab, R.J., 66

Radner, R., 3, 3n1, 4n2, 123, 208n21 random variables, 36, 43, 77, 86, 98, 109–10, 185; normal distribution of, 86–8, 93, 114, 125, 156–7, 218; random distribution of, 183

rate of return, 27, 53 rational expectations equilibrium, 113ff, 123–4, 154, 208

rational expectations models, 3, 59, 89, 98, 113, 119–27, 155ff, 179, 182, 185n3, 188, 206, 210, 230, 254. See also Kyle models

Raviv, A., 161

Ready, M.J., 177

recursive models, 31, 101–2

risk, 28, 35, 162

risk averse traders, 42, 182

risk aversion, 25–7, 28, 108–9, 114–15, 138, 182, 221;

risk free assets. See assets, and risk risk neutral dealer model, 54–6

risk neutral intertemporal models, 29

SOFFEX. See Swiss Options and Futures Exchange

risk neutrality, 60n4, 108, 134, 138 risk neutral market makers, 70, 90, 131, 182–3, 198

Sofianos, G., 24, 51

risk neutral spread, 35, 42 risk neutral traders, 54, 58, 67, 90, 109, 235

specialists, 9–11, 25, 38, 44, 60, 70, 153, 180, 182; book of, 9–10, 37, 38, 179, 192–4, 198, 200. See also market makers

risky assets. See assets, and risk

Roberts, H., 64n8

speculation, 59, 227

Rochet, J.C., 91n1, 113-14, 116n13

Rock, K., 192–4, 196–8, 214 speculators, 107, 210, 217, 219, 221–2. See also outside customers; informed traders

Roell, A., 253, 255–7, 260, 262–5, 267

Spiegel, M., 113n12, 130, 138–9, 185n3

Roll, R., 65, 130, 142

Rossi, P.E., 167

Rothschild, N.M., 7

Rule 80A, 11

spread, 21, 24, 28, 36, 42, 43, 49, 54, 56, 64, 181, 202; and large trades, 68–9; and liquidity, 216–17; structure of, 42; and time horizons, 35n15

Srinivas, P.S., 248n11, 250n12

saitori, 8, 11–12

Starks, L., 173n9

Schaede, U., 9, 12n9

Stickel, S.E., 160

Schleifer, A., 205n18

Stiglitz, J.E., 125, 154, 156n2

Scholes, M., 248n11

Schwartz, E.S., 206n19

Schwartz, R., 13, 45–6, 192 stochastic processes, 29–30, 32, 171, 200–1, 203; and order flow, 16, 29–30, 36

search models, 235, 240

stocks, 30–1, 35–7, 43 securities markets, 13, 73, 119, 130, 169, 180, 190, 201, 205, 250; batch trading in, 89; and information, 232, 247

Stokey, N., 55n2, 59, 67, 159, 185n3

Stoll, H., 13, 25, 29, 30–49 passim, 104n7, 188n5, 197, 222

security market microstructure: theoretical analyses of, 13ff stop orders, 192–3, 198–200, 203

security prices, 1, 13, 24–5, 66, 119, 147, 154, 179, 251

strategic behavior, 67, 74, 90, 92–3, 106, 140–2; and security returns, 143–50; and trading mechanism, 113–17

security returns, 142–50, 247

semi-strong-form efficiency, 64 strategic models, 89ff, 129ff, 150-1, 179. See also Kyle models

separating equilibrium, 68–70, 135, 257

Seppi, D., 130, 234, 240–3, 248–9

strong-form efficiency, 64, 82

sequential-auction models, 91, 101–3, 110

Strong Law of Large Numbers, 83–5, 88, 100, 165–6

sequential trade models, 58–9, 60, 66, 67, 73–5, 129, 161, 169, 173, 198

Subrahmanyam, A., 106, 108–12, 113n11, 130, 134, 138–9, 243–5067, 73–5, 129, 161, 169, 173, 198 shocks, 183, 208, 217, 223

Summers, L.H., 205n18

short sales, 169–70, 173, 236

sunshine trades, 210–14, 260, 265

signals, 66–7, 96, 119–21, 124, 134, 157–8, 163, 165, 201; and noise, 140, 156, 182, 249; quality of, 167–8; and uninformed traders, superior information, 54, 65, 90, 227, 262

supply and demand, 4–5, 14, 60, 157, 163131, 170. See also information single auction framework, 91-100 supply curves, 5, 35, 213

supply uncertainty, 156, 158

small trades, 71–2, 186, 226, 231n5

Smidt, S., 23, 24, 51, 52

Swiss Options and Futures Exchange (SOFFEX), 180

Smith, 103n6

social welfare, 182, 251, 257

syndication, 70, 234–9

Smith, T., 262

Tauchen, G., 167

Taylor series expansion, 26, 33, 34 terms of trade, 41, 106, 109. See also market prices

third markets, 190, 269

three-period models, 156, 217

time dimensions, 14, 17, 30, 62, 64, 130, 168–77, 179, 217

time horizon, 31, 35, 153ff

Tirole, J., 151

TMCE. See two market conjectural equilibrium

Tokyo Stock Exchange, 11–12, 258n4

trade delays, 258–9

trade returns, 143–50

traders, 5, 47, 58, 162, 169, 223, 253; behavior of, 4, 6, 13, 101–2; information sets of, 155–8, 167; optimal order strategy of, 46, 98, 101, 114; population of, 58, 67; types of, 67, 206, 210, 217. See also discretionary traders; informed traders; noise traders; risk neutral traders; uninformed traders

trade(s), 1–5, 9, 62, 67, 91, 137, 140, 168, 170, 261–2; gains and losses and, 252ff; information content of, 57–8, 74, 129, 168; patterns of, 130, 135, 142; as signals, 57, 168130, 135, 142; as signals, 57, 168 trade sizes, 28, 66, 91, 96, 182, 214, 223

trading days, 37–8, 40, 101, 131, 139, 147, 175, 199

trading game, 8, 113. See also trading mechanisms

trading halts, 65, 67, 181, 185

trading mechanisms, 8, 94, 106, 180, 222; categories of, 8; design of, 1, 181, 205; and equilibrium, 3, 113; goal of, 11; governing rules of, 6–7; and market viability, 180, 186–7; nature of, 89

trading periods, 90, 131, 134

trading process, 5, 103, 113, 129

trading volume, 160–8, 176

trading week, 140–1 transaction costs, 5, 46, 47, 53, 227, 262

transaction size, 27, 35, 183

transparent markets, 255–6

tree diagram, 62, 63

true value, 26, 27, 30, 61, 65, 77, 158–9, 198

truth, 26, 75, 155–6, 177, 240

two date models, 25, 193–4

two market conjectural equilibrium, 224–5

two period models, 156, 158, 206, 210, 223

uncertain information, 14, 71, 202

uninformed traders, 53–7, 62, 71, 74, 96–7n3, 114, 129ff, 134, 154, 174–5, 186–7; behavior of, 101–2, 199; and large quantity, 67–8; order distribution of, 92; problems of, 59, 170

uninformed volume, 96–7n3

units of trade, 186, 195 upstairs markets, 70, 215, 223–34, 239–40

utility, 38, 125, 219

utility maximization problems, 157

utility of wealth, 182, 183

value functions, 40, 238

variables, 23, 33, 184

variances, 98, 99n4, 100, 102, 188n5, 203–4, 226

variance terms, 33

Verrecchia, R.E., 62n7, 156n2, 160-2, 201; and time, 169-76passim

Vila, J.L., 91n1, 113–14, 116n13

Viswanathan, S., 99n4, 106, 109, 130, 140–2

volatility, 103, 271

volume of trade, 6, 130, 160–8

Waldman, R.J., 205n18

Wald's Lemma, 171

Walrasian auctioneer, 4, 114, 120, 124

Wang, J., 161–2

weak-form efficiency, 64 wealth, 36, 182–3; base, 31; initial, 19, 26; terminal, 25–6, 29, 31, 125, 218

weekend effect, 140, 142

Weiner process, 46

welfare, 185, 186, 190, 269

Weunch, S., 190

Whaley, R.E., 188n5, 262

Whitcomb, D., 13, 45–6, 192, 222n3

Wiener process, 30

Wilson, C.A., 189

Wood, R.A., 11, 190n7

Working, H., 5

worse prices, 96, 101, 109, 185, 186, 189, 199, 234, 242

Zabel, E., 37n16

zero profit, 56, 60, 92, 187