Research seminars

​Size Discovery

Finance

Speaker: Darrell Duffie
Stanford

10 December 2015


A Tough Act to Follow: Contrast Effects in Financial Markets

Finance

Speaker: Kelly Shue
Chicago Booth

3 December 2015


Finance

Speaker: Ilya Strebulaev
Stanford

26 November 2015


The Effect of Cash Injections: Evidence from the 1980s Farm Debt Crisis

Finance

Speaker: Nittai Bergman
Massachusetts Institute of Technology

19 November 2015


Market Fragmentation, Fragility, and Welfare

Finance

Speaker: Giovanni Cespa
City University London

5 November 2015


We study a two-period model in which two classes of dealers intermediate liquidity traders’ orders, and where markets are fragmented due to both an informational and a participation friction. ‘Fast’ dealers continuously monitor the market, thereby trading at both dates; normal dealers, instead, only trade in the first period. This setup generates propagation of liquidity shocks, liquidity complementarities, and potential multiple equilibria with different levels of liquidity. The model can explain market fragility and “flash crashes.” We assess the impact of a decrease in fragmentation on market quality and traders’ welfare. An increase in the mass of fast dealers can decrease liquidity. However, with transparent markets, liquidity and welfare are always increasing with market participation. Furthermore, equilibria with high liquidity are not necessarily associated with higher welfare.