A Comparison of Stock Market Mechanisms

Giovanni Cespa

RAND Journal of Economics, 2004, vol. 35, issue 4, 803-824

Abstract: I analyze a multi-asset market under two trading mechanisms. In the first (the unrestricted system), traders' demand for each asset depends on all equilibrium prices, and prices reflect the information contained in all order flows; in the second (the restricted system), traders' demand depends on the traded asset price, and prices reflect single order flow information. I show that informed traders' use of multidimensional private information depends on the number of prices they observe and on the price-formation process. I then give conditions rendering the restricted system more efficient than the unrestricted system.

Keywords: General; Financial; Markets:; General; (includes; measurement; and; data); Stock; Market (search for similar items in EconPapers)
JEL-codes: G10 (search for similar items in EconPapers)
Date: 2004
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Working Paper: A comparison of stock market mechanisms (2015)
Working Paper: A Comparison of Stock Market Mechanism (2003)
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