What is the Point of (the Hundreds of Thousands of Billions of) Stock Transactions?

Gunther Capelle-Blancard

Comparative Economic Studies, 2018, vol. 60, issue 1, No 3, 15-33

Abstract: Abstract Since the financial crisis, several academic studies have highlighted the excessive growth of the financial sector. In this article, we focus on the sharp upward trend in stock trading since the 1980s. Globally, trading in equity markets have now hit over $100,000 billion, equivalent to nearly 150% of GDP, compared with only 5% in 1975. What is the “social utility” of all these trades? Stock market liquidity is undoubtedly a key factor in the cost of capital and, as such, a determinant of economic growth. However, the marginal effect is likely decreasing. Furthermore, many studies suggest that above a certain threshold, trading has a negative effect since: (i) companies benefit from the involvement of long-term investors; (ii) investors tend to perform too many trades; and (iii) it comes at the expense of transparency and erodes the trust vis-à-vis stock markets. A handful of measures have been taken to, if not reduce, then at least limit the growth in stock trading, but these have had only a very limited effect. Only comprehensive reforms of the architecture of stock markets could reverse this trend. Ultimately, these issues take us deeper than trading volume to question the very purpose of stock markets.

Keywords: Finance-growth nexus; Stock exchange; High-frequency trading; Microstructure; Financial transaction tax (search for similar items in EconPapers)
JEL-codes: F38 G1 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1057/s41294-017-0049-x Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: What is the Point of (the Hundreds of Thousands of Billions of) Stock Transactions? (2018)
Working Paper: What is the Point of (the Hundreds of Thousands of Billions of) Stock Transactions? (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:compes:v:60:y:2018:i:1:d:10.1057_s41294-017-0049-x

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/41294/PS2

DOI: 10.1057/s41294-017-0049-x

Access Statistics for this article

Comparative Economic Studies is currently edited by Nauro Campos

More articles in Comparative Economic Studies from Palgrave Macmillan, Association for Comparative Economic Studies Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().