Stock Markets Fragmentation, Volatility and Final Investors
Author | : Cécile Bastidon |
Publisher | : |
Total Pages | : 25 |
Release | : 2016 |
ISBN-10 | : OCLC:1305921001 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Stock Markets Fragmentation, Volatility and Final Investors written by Cécile Bastidon and published by . This book was released on 2016 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: The 2000s in equity markets are marked by two major regulatory shocks: RegNMS in the United States, and MiFID in the European Union. Simultaneously, there is a massive increase in the proportion of high-frequency trading, and market orders volume. However, trading volume decreases. We propose a theoretical model describing the effects of stock markets fragmentation on two types of investors optimization problems: “intermediary” high-frequency and “final” investors. Volatility has a permanent and a transitory component, whose weights depend on market fragmentation via the share of non-marketable orders of intermediary investors. The trading volume of final investors depends on market fragmentation both directly via transation costs, and indirectly via total volatility. A shock in fragmentation may lead to a decrease in trading volume, enhanced in the case of an equity markets crisis by a rise in the components of volatility.