|By:||Nathalie Oriol (GREDEG – Groupe de Recherche en Droit, Economie et Gestion – CNRS – Centre National de la Recherche Scientifique – UNS – Université Nice Sophia Antipolis)
Alexandra Rufini (GREDEG – Groupe de Recherche en Droit, Economie et Gestion – CNRS – Centre National de la Recherche Scientifique – UNS – Université Nice Sophia Antipolis)
Dominique Torre (GREDEG – Groupe de Recherche en Droit, Economie et Gestion – CNRS – Centre National de la Recherche Scientifique – UNS – Université Nice Sophia Antipolis)
European financial markets experiment a strong competition between historical players and new trading platforms, including the controversial dark pools. Our theoretical setting analyzes the interaction between heterogeneous investors and trading services providers in presence of market externalities. We compare different forms of organization of the market, each in presence of an off-exchange and an incumbent facing a two-sided activity (issuers and investors): a consolidated exchange with the incum- bent only, and fragmented exchanges with several platforms, including lit and dark pools, in competition for order ows. By capturing investors from off-exchange, dark trading may enhance market externalities and market stakeholders’ welfare.
|Keywords:||Microstructure, dark pools , Over-The-Counter market, liquidity, market externalities, two-sided markets|
Gunduz Caginalp, David Porter & Vernon Smith (2001) “Financial Bubbles: Excess Cash, Momentum, and Incomplete Information." Journal of Psychology and Financial Markets, Volume 2, Issue 2, pages 80-99. 2001,DOI:10.1207/S15327760JPFM0202_03; psu.edu 提供的 [PDF]
We report on a large number of laboratory market experiments demonstrating that a market bubble can be reduced under the following conditions: 1) a low initial liquidity level, i.e., less total cash than value of total shares, 2) deferred dividends, and 3) a bid-ask book that is open to traders. Conversely, a large bubble arises when the opposite conditions exist. The first part of the article is comprised of twenty-five experiments with varying levels of total cash endowment per share (liquidity level), payment or deferral of dividends and an open or closed bid-ask book. We find that the liquidity level has a very strong influence on the mean and maximum prices during an experiment (P < 1/10,000). These results suggest that within the framework of the classical bubble experiments (dividends distributed after each period and closed book), each dollar per share of additional cash results in a maximum price that is $1 per share higher. There is also limited statistical support for the theory that deferred dividends (which also lower the cash per share during much of the experiment) and an open book lead to a reduced bubble. The three factors taken together show a striking difference in the median magnitude of the bubble ($7.30 versus $0.22 for the maximum deviation from fundamental value). Another set of twelve experiments features a single dividend at the end of fifteen trading periods and establishes a 0.8 correlation between price and liquidity during the early periods of the experiments. As a result,