Market microstructure: A survey

Ananth Madhavan
<span title="">2000</span> <i title="Elsevier BV"> <a target="_blank" rel="noopener" href="https://fatcat.wiki/container/xagij2pg2vdxpnkhmp4e7oum5m" style="color: black;">Journal of financial markets</a> </i> &nbsp;
Market microstructure is the area of finance that studies the process by which investors' latent demands are ultimately translated into prices and volumes. This paper reviews the theoretical, empirical and experimental literature on market microstructure with a special focus on informational issues relating to: (1) Price formation and price discovery, including both static issues such as the determinants of trading costs and dynamic issues such the process by which prices come to impound
more &raquo; ... tion over time, (2) Market structure and design, including the relation between price formation and trading protocols, (3) Information and disclosure, especially the topic of market transparency, i.e., the ability of market participants to observe information about the trading process, and (4) Interface of market microstructure with other areas of finance including asset pricing, international finance, and corporate finance. I discuss the implications of recent research for academics, investors, policy makers, and regulators. JEL Classification: G10, G34 * I thank Avanidhar Subrahmanyam (editor), Rich Lyons and participants at the Market Microstructure Ph.D. seminar at Erasmus University for their comments. I have also benefited greatly from past discussions with Ian Domowitz, Margaret Forster, Larry Harris, Don Keim, and Seymour Smidt that are reflected in this paper. Of course, any errors are entirely my own.
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