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New page: '''PHDBA 239DA - Financial Market Microstructure''' is a PhD level course that is required for finance students. This page details the course as it was taught by [http://www2.haas.berkeley...
'''PHDBA 239DA - Financial Market Microstructure''' is a PhD level course that is required for finance students. This page details the course as it was taught by [http://www2.haas.berkeley.edu/Faculty/parlour_christine.aspx Christine Parlour] in the Spring of 2011.
==Overview==
The following class overview was taken from the [http://www.edegan.com/repository/PHDBA239DA-Syllabus.pdf course outline]:
This is a 7 week course in market microstructure. Market Microstructure
is the study of the price formation mechanism. It also typically addresses
what we can learn from prices (i.e., the information content of a trade).
In �nance as we are obsessed with prices, studying how they arise from
agents' strategic behavior seems a sensible place to start. As data are readily
available, there is a voluminous empirical literature. Given that a lot of the
models are very stylized and the operation of the markets so complex, the
empirical work is aggressively reduced form. Needless to say, I won't cover
the empirical work { this does not represent my comparative advantage.1
After the crisis, researchers in other �elds (asset pricing) are beginning to
understand that understanding the mechanics of trade is important. I will try
to address how some of the ideas of microstructure have been incorporated
into the other �elds. Given the brevity of the course, this list is both short
and idiosyncratic.
==Evaluation==
The class is evaluated on:
#A referee report on current working paper
#A 2-5 page paper proposal
#Three optional assignments
==Sequence of Topics==
The following sequence is in the outline:
*Jan 19 - Rational Expectations Models
*Jan 26 - Classic Models I
*Feb 2 - Classic Models II
*Feb 9 - Limit Order Markets
*Feb 16 - Fixed Income Markets
*Feb 23 - Liquidity and Asset Prices
*March 2 - Liquidity, Trade and Contracts
==Papers==
===Classic Market Microstructure===
====General Surveys of the �Field====
*O'Hara, Maureen (1995), "Market Microstructure Theory", Blackwell (This is a book.) [http://books.google.com/books?id=udXjR2Dg7bwC&lpg=PR5&ots=o2Vi_-Ba-x&dq=OHara%20(1995)%20-%20Market%20Microstructure%20Theory&lr&pg=PR5#v=onepage&q&f=false (link)]
*Biais, Bruno, Larry Glosten and Chester Spatt (2005), "Market Microstructure: A Survey of Microfoundations, Empirical Results, and Policy Implications", Journal of Financial Markets 8, May 217-264. [http://www.edegan.com/pdfs/Biais%20Glosten%20Spatt%20(2005)%20-%20Market%20Microstructure%20A%20Survey%20of%20Microfoundations.pdf (pdf)]
*Parlour, C. and D. Seppi (2008), "Limit Order Markets: A Survey", Handbook of Financial Intermediation and Banking [http://www.edegan.com/pdfs/Parlour%20Seppi%20(2008)%20-%20Limit%20Order%20Markets%20A%20Survey.pdf (pdf)]
*Brunnermeier (2001), "Asset Pricing under Asymmetric information: Bubbles, Crashes, Technical Analysis, and Herding", Oxford University Press [http://www.edegan.com/pdfs/Brunnermeier%20(2001)%20-%20Asset%20Pricing%20under%20Asymmetric%20information.pdf (pdf)]
*De Jong F. and B. Rindi (2009), "The Microstructure of Financial Markets", Cambridge University Press. [http://econpapers.repec.org/bookchap/cupcbooks/9780521867849.htm (link)]
====Stylized Models of Trade (Rational Expectations)====
*Grossman and Stiglitz (1980), "On the Impossibility of informationally efficient markets", American Economic Review Vol 70, pp.393-408. [http://www.edegan.com/pdfs/Grossman%20Stiglitz%20(1980)%20-%20On%20The%20Impossibility%20Of%20Informationally%20Efficient%20Markets.pdf (pdf)]
====What is Needed to Generate Trade====
*Milgrom and Stokey (1982), "Information, Trade and Common Knowledge", Journal of Economic Theory, 26, 17-27. [http://www.edegan.com/pdfs/Milgrom%20Stokey%20(1982)%20-%20Information%20Trade%20and%20Common%20Knowledge.pdf (pdf)]
*Aumann (1976), "Agreeing to Disagree", Annals of Statistics, 4, 1236-239. [http://www.edegan.com/pdfs/Aumann%20(1976)%20-%20Agreeing%20to%20Disagree.pdf (pdf)]
*Akerlof (1970), "The Market for Lemons", Quarterly Journal of Economics, Vol 84, No 3, p488-500. [http://www.edegan.com/pdfs/Akerlof%20(1970)%20-%20The%20Market%20for%20Lemons.pdf (pdf)]
*Ausubel (1990), "Insider Trading in a Rational Expectations Economy", The American Economic Review, Vol 80, No 5 1022-1041. [http://www.edegan.com/pdfs/Ausubel%20(1990)%20-%20Insider%20Trading%20in%20a%20Rational%20Expectations%20Economy.pdf (pdf)]
*Myerson and Sattherthwaite (1983), "Efficient Mechanisms for Bilateral Trade", Journal of Economic Theory, 29, 265-281 [http://www.edegan.com/pdfs/Myerson%20Sattherthwaite%20(1983)%20-%20Efficient%20Mechanisms%20for%20Bilateral%20Trade.pdf (pdf)]
====Classic Microstructure Models====
*Glosten and Milgrom (1985), "Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Trades", Journal of Financial Economics, 13, 71-100. [http://www.edegan.com/pdfs/Glosten%20Milgrom%20(1985)%20-%20Bid%20Ask%20and%20Transaction%20Prices%20in%20a%20Specialist%20Market%20with%20Heterogeneously%20Informed%20Trades.pdf (pdf)]
*Kyle (1985), "Continuous Auctions and Insider Trader", Econometrica, 3, 1315-1336. [http://www.edegan.com/pdfs/Kyle%20(1985)%20-%20Continuous%20Auctions%20and%20Insider%20Trader.pdf (pdf)]
*Kyle (1989), "Informed Speculation with Imperfect Competition", Review of Economic Studies 56, 317-355 [http://www.edegan.com/pdfs/Kyle%20(1989)%20-%20Informed%20Speculation%20with%20Imperfect%20Competition.pdf (pdf)]
*Amihud and Mendelson (1980), "Dealership Markets: Market Making with Inventory", Journal of Financial Economics, 8, 31-53 [http://www.edegan.com/pdfs/Amihud%20Mendelson%20(1980)%20-%20Dealership%20Markets%20Market%20Making%20with%20Inventory.pdf (pdf)]
*Easley, D. and M. O'Hara (1987), "Price, Trade Size and Information in Securities Markets", Journal of Financial Economics 19, 69-90. [http://www.edegan.com/pdfs/Easley%20OHara%20(1987)%20-%20Price%20Trade%20Size%20and%20Information%20in%20Securities%20Markets.pdf (pdf)]
===Limit Order Markets===
*Rock, K. (1996), "The Specialist's Order Book and Price Anomalies", working paper, Harvard University. (This paper is legendary but not available online!)
*Seppi, Duane (1997), "Liquidity Provision with Limit Orders and a Strategic Specialist", Review of Financial Studies 10, 103-150. [http://www.edegan.com/pdfs/Seppi%20(1997)%20-%20Liquidity%20Provision%20with%20Limit%20Orders%20and%20a%20Strategic%20Specialist.pdf (pdf)]
*Glosten, Larry (1994), "Is the Electronic Open limit Order Book Inevitable", Journal of Finance 49,1127-1161 (YES) [http://www.edegan.com/pdfs/Glosten%20(1994)%20-%20Is%20the%20Electronic%20Open%20limit%20Order%20Book%20Inevitable.pdf (pdf)]
*Parlour (1998), "Price Dynamics in a Limit Order Market", Review of Financial Studies 11 789-816 [http://www.edegan.com/pdfs/Parlour%20(1998)%20-%20Price%20Dynamics%20in%20a%20Limit%20Order%20Market.pdf (pdf)]
*Foucault (1999), "Order Flow composition and Trading Costs in a Dynamic Limit Order Market", Journal of Financial Markets [http://www.edegan.com/pdfs/Foucault%20(1999)%20-%20Order%20Flow%20Composition%20and%20Trading%20Costs%20in%20a%20Dynamic%20Limit%20Order%20Market.pdf (pdf)]
*Foucault, T., O. Kadan and E.Kandel (2005), "Limit Order Book as a Market for Liquidity", Review of Financial Studies, 18, 1171-1217. [http://www.edegan.com/pdfs/Foucault%20Kadan%20Kandel%20(2005)%20-%20Limit%20Order%20Book%20as%20a%20Market%20for%20Liquidity.pdf (pdf)]
*Goettler, R., C. Parlour and U. Rajan (2005), "Equilibrium in a Dynamic Limit Order Market", Journal of Finance, 2005, Vol 60 No 5 p149-192 [http://www.edegan.com/pdfs/Goettler%20Parlour%20Rajan%20(2005)%20-%20Equilibrium%20in%20a%20Dynamic%20Limit%20Order%20Market.pdf (pdf)]
*Back, Kerry and S. Baruch (2005), "Working Orders in Limit-Order Markets and Floor Exchanges", Journal of Finance [http://www.edegan.com/pdfs/Back%20Baruch%20(2005)%20-%20Working%20Orders%20in%20Limit%20Order%20Markets%20and%20Floor%20Exchanges.pdf (pdf)]
*Rosu, I. (2005), "A Dynamic Model of the Limit Order Book", U Chicago working paper. [http://www.edegan.com/pdfs/Rosu%20(2005)%20-%20A%20Dynamic%20Model%20of%20the%20Limit%20Order%20Book.pdf (pdf)]
===Market Design and Competition between Markets===
*Biais, Bruno (1993), "Price Formation and Equilibrium liquidity in Fragmented and Centralized Markets", Journal of Finance 48, 157-185. [http://www.edegan.com/pdfs/Biais%20(1993)%20-%20Price%20Formation%20and%20Equilibrium%20liquidity%20in%20Fragmented%20and%20Centralized%20Markets.pdf (pdf)]
*Biais, B., D. Martimort and J. Rochet (2000), "Competing Mechanisms in a Common Value Environment", Econometrica 68, 799-838. [http://www.edegan.com/pdfs/Biais%20Martimort%20Rochet%20(2000)%20-%20Competing%20Mechanisms%20in%20a%20Common%20Value%20Environment.pdf (pdf)]
*Parlour and Seppi (2001), "Liquidity based Competition for Order Flow", Review of Financial Studies. [http://www.edegan.com/pdfs/Parlour%20Seppi%20(2001)%20-%20Liquidity%20based%20Competition%20for%20Order%20Flow.pdf (pdf)]
*Foucault, Thierry and T. Gehrig (2008), "Stock Price Informativeness, Cross-Listings and Investment Decisions", Journal of Financial Economics 88, 146-168. [http://www.edegan.com/pdfs/Foucault%20Gehrig%20(2008)%20-%20Stock%20Price%20Informativeness%20Cross%20Listings%20and%20Investment%20Decisions.pdf (pdf)]
*Foucault, Theirry and A. Menkveld (2008), "Competition for Order flow and Smart Order Routing systems," Journal of Finance 63, 119-58 [http://www.edegan.com/pdfs/Foucault%20Menkveld%20(2008)%20-%20Competition%20For%20Order%20Flow%20And%20Smart%20Order%20Routing%20Systems.pdf (pdf)]
===Is trading risk or liquidity priced?===
*Acharya, Viral and L. Pedersen,(2005), "Asset Pricing and Liquidity Risk", Journal of Financial Economics, Vol 77, pp 375-410 [http://www.edegan.com/pdfs/Acharya%20Pedersen%20(2005)%20-%20Asset%20Pricing%20and%20Liquidity%20Risk.pdf (pdf)]
*Amihud, Yakov and Haim Mendelson (1986), "Asset Pricing and the Bid Ask Spread", Journal of Financial Economics, 17, 31-56 [http://www.edegan.com/pdfs/Amihud%20Mendelson%20(1986)%20-%20Asset%20Pricing%20and%20the%20Bid%20Ask%20Spread.pdf (pdf)]
*Amihud, Y., H. Mendelson, and L, Pedersen (2005), "Liquidity and Asset Prices", Foundations and Trends in Finance I. 269-364 [http://www.edegan.com/pdfs/Amihud%20Mendelson%20Pedersen%20(2005)%20-%20Liquidity%20and%20Asset%20Prices.pdf (pdf)]
*Brennan, M. J. and A. Subrahmanyam (1996), "Market Microstructure and Asset Pricing", Journal of Financial Economics 41, 441-464 [http://www.edegan.com/pdfs/Brennan%20Subrahmanyam%20(1996)%20-%20Market%20Microstructure%20and%20Asset%20Pricing.pdf (pdf)]
*Easley, D. S. Hvidkjaer and M. O'Hara (2002), "Is information risk a determinant of Asset returns", The Journal of Finance 58, 2185-2210. [http://www.edegan.com/pdfs/Easley%20Hvidkjaer%20OHara%20(2002)%20-%20Is%20Information%20Risk%20A%20Determinant%20Of%20Asset%20Returns.pdf (pdf)]
*Pastor, L. And R. Stambaugh (2003), "Liquidity risk and Expected Stock Returns", Journal of Political Economy, 111, 642-685. [http://www.edegan.com/pdfs/Pastor%20Stambaugh%20(2003)%20-%20Liquidity%20risk%20and%20Expected%20Stock%20Returns.pdf (pdf)]
*Chordia, T. R. Roll and A. Subrahmanyam (2000), "Commonality in Liquidity", Journal of Financial Economics, 56, 3-28. [http://www.edegan.com/pdfs/Chordia%20Roll%20Subrahmanyam%20(2000)%20-%20Commonality%20in%20Liquidity.pdf (pdf)]
*Chordia, T. R. Roll and A. Subrahmanyam (2001), "Market Liquidity and Trading Activity", Journal of Finance, 56, 501-530. [http://www.edegan.com/pdfs/Chordia%20Roll%20Subrahmanyam%20(2001)%20-%20Market%20Liquidity%20and%20Trading%20Activity.pdf (pdf)]
*Grossman, S. and Miller, M. (1988), "Liquidity and market structure", Journal of Finance 38, 617-633. [http://www.edegan.com/pdfs/Grossman%20Miller%20(1988)%20-%20Liquidity%20And%20Market%20Structure.pdf (pdf)]
*Holmstrom, B. and Tirole, J. (2001), "LAPM - a liquidity based asset pricing model" [http://www.edegan.com/pdfs/Holmstrom%20Tirole%20(2001)%20-%20LAPM%20A%20Liquidity%20Based%20Asset%20Pricing%20Model.pdf (pdf)]
*Easley, David and M. O'Hara (2004) - "Information and the cost of capital", Journal of Finance Vol.59, No 4. p 1553-1583. [http://www.edegan.com/pdfs/Easley%20OHara%20(2004)%20-%20Information%20And%20The%20Cost%20Of%20Capital.pdf (pdf)]
===Slow Moving Capital and Asset prices===
*Gromb, Denis and Vayanos, Dimtri (2002), "Equilibrium and Welfare in Markets with Financially Constrained Arbitrageurs", Journal of Financial Economics [http://www.edegan.com/pdfs/Gromb%20Vayanos%20(2002)%20-%20Equilibrium%20and%20Welfare%20in%20Markets%20with%20Financially%20Constrained%20Arbitrageurs.pdf (pdf)]
*Duffie, Darrell, Semyon Malamud and Gustavo Manso (2009), "Information Percolation with Equilibrium Search Dynamics", Econometrica, Volume 77: 1513-1574. [http://www.edegan.com/pdfs/Duffie%20Malamud%20Manso%20(2009)%20-%20Information%20Percolation%20with%20Equilibrium%20Search%20Dynamics.pdf (pdf)]
*Brunnermeier, Marcus and L. Pedersen (2009), "Market Liquidity and Funding Liquidity", The Review of Financial Studies 22, p. 2201-2238 [http://www.edegan.com/pdfs/Brunnermeier%20Pedersen%20(2009)%20-%20Market%20Liquidity%20and%20Funding%20Liquidity.pdf (pdf)]
===Treasury Auctions===
*Wilson (1979), "Auctions of Shares", Quarterly Journal of Economics, Vol 93 No 4. p 675-689. [http://www.edegan.com/pdfs/Wilson%20(1979)%20-%20Auctions%20of%20Shares.pdf (pdf)]
*Back and Zender (1993), "Auctions of Divisible Goods", Review of Financial Studies, 6 p733-764. [http://www.edegan.com/pdfs/Back%20Zender%20(1993)%20-%20Auctions%20of%20Divisible%20Goods.pdf (pdf)]
*Wang and Zender (2002), "Auctioning Divisible goods", Economic Theory, 19, 673-705.[http://www.edegan.com/pdfs/Wang%20Zender%20(2002)%20-%20Auctioning%20Divisible%20goods.pdf (pdf)]
*Kremer, and Nyborg (2004), "Underpricing and Market Power in Uniform Price Auctions", Review of Financial Studies, 17, 849-877 [http://www.edegan.com/pdfs/Kremer%20Nyborg%20(2004)%20-%20Underpricing%20and%20Market%20Power%20in%20Uniform%20Price%20Auctions.pdf (pdf)]
*Nyborg and Strebulaev (2004), "Multiple Unit Auctions and Short Squeezes", Review of Financial Studies 17, 545-580 [http://www.edegan.com/pdfs/Nyborg%20Strebulaev%20(2004)%20-%20Multiple%20Unit%20Auctions%20and%20Short%20Squeezes.pdf (pdf)]
*Bikhchandani and Huang (1989), "Auctions with Resale", Review of Financial Studies, Vol 2, no3 p311-339 [http://www.edegan.com/pdfs/Bikhchandani%20Huang%20(1989)%20-%20Auctions%20with%20Resale.pdf (pdf)]
*Vickery, William (1961), "Counterspeculation, Auctions and Competitive Sealed Tenders", Journal of Finance [http://www.edegan.com/pdfs/Vickery%20(1961)%20-%20Counterspeculation,%20Auctions%20and%20Competitive%20Sealed%20Tenders.pdf (pdf)]
===Fixed Income Microstructure===
*Duffie, D. N. Garleanu, and L. Pedersen (2005), "Over the Counter Markets", Econometrica 73, 1815-1847 [http://www.edegan.com/pdfs/Duffie%20Garleanu%20Pedersen%20(2005)%20-%20Over%20the%20Counter%20Markets.pdf (pdf)]
*Biais, Bruno and Rick Green (2007), "The microstructure of the Bond Market in the 20th Century" [http://www.edegan.com/pdfs/Biais%20Green%20(2007)%20-%20The%20Microstructure%20Of%20The%20Bond%20Market%20In%20The%2020th%20Century.pdf (pdf)]
*Biais, Bruno, Fany Declerk, J. Dow, E. Van Thadden (2006), "Transparency, Liquidity and Information in Dealer markets", Working paper [http://econpapers.repec.org/paper/idewpaper/7543.htm (link)]
*Green, Rick, B. Hollifield, and N. Schurhoff (2007), "Dealer Intermediation and Pice Behavior in the aftermarket for new bond issues", Journal of Financial Economics [http://www.edegan.com/pdfs/Green%20Hollifield%20Schurhoff%20(2007)%20-%20Dealer%20Intermediation%20And%20Price%20Behavior%20In%20The%20Aftermarket%20For%20New%20Bond%20Issues.pdf (pdf)]
*Green, Rick, B. Hollifield, and N. Schurhoff (2007), "Financial Intermeidation and the costs of trading in an opaque market", Review of Financial Studies. [http://www.edegan.com/pdfs/Green%20Hollifield%20Schurhoff%20(2006)%20-%20Financial%20Intermediation%20And%20The%20Costs%20Of%20Trading%20In%20An%20Opaque%20Market.pdf (pdf)]
*Vayanos, Dimitri and P.O. Weill (2008), "A search based theory of the on-the-run phenomenon", Journal of Finance 63, pp.1361-1398. [http://www.edegan.com/pdfs/Vayanos%20Weill%20(2008)%20-%20A%20Search%20Based%20Theory%20Of%20The%20On%20The%20Run%20Phenomenon.pdf (pdf)]
===Liquidity, Trade and Contracts===
*Chemla, G. and C. Hennessey (2010), "Security Design, Liquidity and the Informational Role of Prices", Working paper [http://www.edegan.com/pdfs/Chemla%20Hennessey%20(2010)%20-%20Security%20Design%20Liquidity%20and%20the%20Informational%20Role%20of%20Prices.pdf (pdf)]
*Chemla, G. and C. Hennessey (2010), "Privately optimal Securitization and Publicaly Suboptimal Risk Sharing" [http://www.edegan.com/pdfs/Chemla%20Hennessey%20(2010)%20-%20Privately%20optimal%20Securitization%20and%20Publicaly%20Suboptimal%20Risk%20Sharing.pdf (pdf)]
*Edmans, Alex and G. Manso (2011), "Governance Through Trading and Intervention: A Theory of Multiple Blockholders", Review of Financial Studies, forthcoming. [http://www.edegan.com/pdfs/Edmans%20Manso%20(2009)%20-%20Governance%20Through%20Trading%20and%20Intervention%20A%20Theory%20of%20Multiple%20Blockholders.pdf (pdf)]
*Faure-Grimaud, Antoine and D. Gromb (2004), "Public Trading and Private Incentives", Review of Financial Studies 17(4) 985-1014 [http://www.edegan.com/pdfs/FaureGrimaud%20Gromb%20(2004)%20-%20Public%20Trading%20and%20Private%20Incentives.pdf (pdf)]
*Parlour, C. and G. Plantin (2008), "Loan Sales and Relationship Banking", Journal of Finance, Volume 63(3), 1291-1314. [http://www.edegan.com/pdfs/Parlour%20Plantin%20(2008)%20-%20Loan%20Sales%20and%20Relationship%20Banking.pdf (pdf)]
*Admati, Anat and Paul Pfeiderer (2009), "The Wall street Walk and Shareholder Activism: Exit as a Form of Voice", Review of Financial Studies, 22 (7), pp.2645-2685. [http://www.edegan.com/pdfs/Admati%20Pfeiderer%20(2009)%20-%20The%20Wall%20street%20Walk%20and%20Shareholder%20Activism%20Exit%20as%20a%20Form%20of%20Voice.pdf (pdf)]
==Overview==
The following class overview was taken from the [http://www.edegan.com/repository/PHDBA239DA-Syllabus.pdf course outline]:
This is a 7 week course in market microstructure. Market Microstructure
is the study of the price formation mechanism. It also typically addresses
what we can learn from prices (i.e., the information content of a trade).
In �nance as we are obsessed with prices, studying how they arise from
agents' strategic behavior seems a sensible place to start. As data are readily
available, there is a voluminous empirical literature. Given that a lot of the
models are very stylized and the operation of the markets so complex, the
empirical work is aggressively reduced form. Needless to say, I won't cover
the empirical work { this does not represent my comparative advantage.1
After the crisis, researchers in other �elds (asset pricing) are beginning to
understand that understanding the mechanics of trade is important. I will try
to address how some of the ideas of microstructure have been incorporated
into the other �elds. Given the brevity of the course, this list is both short
and idiosyncratic.
==Evaluation==
The class is evaluated on:
#A referee report on current working paper
#A 2-5 page paper proposal
#Three optional assignments
==Sequence of Topics==
The following sequence is in the outline:
*Jan 19 - Rational Expectations Models
*Jan 26 - Classic Models I
*Feb 2 - Classic Models II
*Feb 9 - Limit Order Markets
*Feb 16 - Fixed Income Markets
*Feb 23 - Liquidity and Asset Prices
*March 2 - Liquidity, Trade and Contracts
==Papers==
===Classic Market Microstructure===
====General Surveys of the �Field====
*O'Hara, Maureen (1995), "Market Microstructure Theory", Blackwell (This is a book.) [http://books.google.com/books?id=udXjR2Dg7bwC&lpg=PR5&ots=o2Vi_-Ba-x&dq=OHara%20(1995)%20-%20Market%20Microstructure%20Theory&lr&pg=PR5#v=onepage&q&f=false (link)]
*Biais, Bruno, Larry Glosten and Chester Spatt (2005), "Market Microstructure: A Survey of Microfoundations, Empirical Results, and Policy Implications", Journal of Financial Markets 8, May 217-264. [http://www.edegan.com/pdfs/Biais%20Glosten%20Spatt%20(2005)%20-%20Market%20Microstructure%20A%20Survey%20of%20Microfoundations.pdf (pdf)]
*Parlour, C. and D. Seppi (2008), "Limit Order Markets: A Survey", Handbook of Financial Intermediation and Banking [http://www.edegan.com/pdfs/Parlour%20Seppi%20(2008)%20-%20Limit%20Order%20Markets%20A%20Survey.pdf (pdf)]
*Brunnermeier (2001), "Asset Pricing under Asymmetric information: Bubbles, Crashes, Technical Analysis, and Herding", Oxford University Press [http://www.edegan.com/pdfs/Brunnermeier%20(2001)%20-%20Asset%20Pricing%20under%20Asymmetric%20information.pdf (pdf)]
*De Jong F. and B. Rindi (2009), "The Microstructure of Financial Markets", Cambridge University Press. [http://econpapers.repec.org/bookchap/cupcbooks/9780521867849.htm (link)]
====Stylized Models of Trade (Rational Expectations)====
*Grossman and Stiglitz (1980), "On the Impossibility of informationally efficient markets", American Economic Review Vol 70, pp.393-408. [http://www.edegan.com/pdfs/Grossman%20Stiglitz%20(1980)%20-%20On%20The%20Impossibility%20Of%20Informationally%20Efficient%20Markets.pdf (pdf)]
====What is Needed to Generate Trade====
*Milgrom and Stokey (1982), "Information, Trade and Common Knowledge", Journal of Economic Theory, 26, 17-27. [http://www.edegan.com/pdfs/Milgrom%20Stokey%20(1982)%20-%20Information%20Trade%20and%20Common%20Knowledge.pdf (pdf)]
*Aumann (1976), "Agreeing to Disagree", Annals of Statistics, 4, 1236-239. [http://www.edegan.com/pdfs/Aumann%20(1976)%20-%20Agreeing%20to%20Disagree.pdf (pdf)]
*Akerlof (1970), "The Market for Lemons", Quarterly Journal of Economics, Vol 84, No 3, p488-500. [http://www.edegan.com/pdfs/Akerlof%20(1970)%20-%20The%20Market%20for%20Lemons.pdf (pdf)]
*Ausubel (1990), "Insider Trading in a Rational Expectations Economy", The American Economic Review, Vol 80, No 5 1022-1041. [http://www.edegan.com/pdfs/Ausubel%20(1990)%20-%20Insider%20Trading%20in%20a%20Rational%20Expectations%20Economy.pdf (pdf)]
*Myerson and Sattherthwaite (1983), "Efficient Mechanisms for Bilateral Trade", Journal of Economic Theory, 29, 265-281 [http://www.edegan.com/pdfs/Myerson%20Sattherthwaite%20(1983)%20-%20Efficient%20Mechanisms%20for%20Bilateral%20Trade.pdf (pdf)]
====Classic Microstructure Models====
*Glosten and Milgrom (1985), "Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Trades", Journal of Financial Economics, 13, 71-100. [http://www.edegan.com/pdfs/Glosten%20Milgrom%20(1985)%20-%20Bid%20Ask%20and%20Transaction%20Prices%20in%20a%20Specialist%20Market%20with%20Heterogeneously%20Informed%20Trades.pdf (pdf)]
*Kyle (1985), "Continuous Auctions and Insider Trader", Econometrica, 3, 1315-1336. [http://www.edegan.com/pdfs/Kyle%20(1985)%20-%20Continuous%20Auctions%20and%20Insider%20Trader.pdf (pdf)]
*Kyle (1989), "Informed Speculation with Imperfect Competition", Review of Economic Studies 56, 317-355 [http://www.edegan.com/pdfs/Kyle%20(1989)%20-%20Informed%20Speculation%20with%20Imperfect%20Competition.pdf (pdf)]
*Amihud and Mendelson (1980), "Dealership Markets: Market Making with Inventory", Journal of Financial Economics, 8, 31-53 [http://www.edegan.com/pdfs/Amihud%20Mendelson%20(1980)%20-%20Dealership%20Markets%20Market%20Making%20with%20Inventory.pdf (pdf)]
*Easley, D. and M. O'Hara (1987), "Price, Trade Size and Information in Securities Markets", Journal of Financial Economics 19, 69-90. [http://www.edegan.com/pdfs/Easley%20OHara%20(1987)%20-%20Price%20Trade%20Size%20and%20Information%20in%20Securities%20Markets.pdf (pdf)]
===Limit Order Markets===
*Rock, K. (1996), "The Specialist's Order Book and Price Anomalies", working paper, Harvard University. (This paper is legendary but not available online!)
*Seppi, Duane (1997), "Liquidity Provision with Limit Orders and a Strategic Specialist", Review of Financial Studies 10, 103-150. [http://www.edegan.com/pdfs/Seppi%20(1997)%20-%20Liquidity%20Provision%20with%20Limit%20Orders%20and%20a%20Strategic%20Specialist.pdf (pdf)]
*Glosten, Larry (1994), "Is the Electronic Open limit Order Book Inevitable", Journal of Finance 49,1127-1161 (YES) [http://www.edegan.com/pdfs/Glosten%20(1994)%20-%20Is%20the%20Electronic%20Open%20limit%20Order%20Book%20Inevitable.pdf (pdf)]
*Parlour (1998), "Price Dynamics in a Limit Order Market", Review of Financial Studies 11 789-816 [http://www.edegan.com/pdfs/Parlour%20(1998)%20-%20Price%20Dynamics%20in%20a%20Limit%20Order%20Market.pdf (pdf)]
*Foucault (1999), "Order Flow composition and Trading Costs in a Dynamic Limit Order Market", Journal of Financial Markets [http://www.edegan.com/pdfs/Foucault%20(1999)%20-%20Order%20Flow%20Composition%20and%20Trading%20Costs%20in%20a%20Dynamic%20Limit%20Order%20Market.pdf (pdf)]
*Foucault, T., O. Kadan and E.Kandel (2005), "Limit Order Book as a Market for Liquidity", Review of Financial Studies, 18, 1171-1217. [http://www.edegan.com/pdfs/Foucault%20Kadan%20Kandel%20(2005)%20-%20Limit%20Order%20Book%20as%20a%20Market%20for%20Liquidity.pdf (pdf)]
*Goettler, R., C. Parlour and U. Rajan (2005), "Equilibrium in a Dynamic Limit Order Market", Journal of Finance, 2005, Vol 60 No 5 p149-192 [http://www.edegan.com/pdfs/Goettler%20Parlour%20Rajan%20(2005)%20-%20Equilibrium%20in%20a%20Dynamic%20Limit%20Order%20Market.pdf (pdf)]
*Back, Kerry and S. Baruch (2005), "Working Orders in Limit-Order Markets and Floor Exchanges", Journal of Finance [http://www.edegan.com/pdfs/Back%20Baruch%20(2005)%20-%20Working%20Orders%20in%20Limit%20Order%20Markets%20and%20Floor%20Exchanges.pdf (pdf)]
*Rosu, I. (2005), "A Dynamic Model of the Limit Order Book", U Chicago working paper. [http://www.edegan.com/pdfs/Rosu%20(2005)%20-%20A%20Dynamic%20Model%20of%20the%20Limit%20Order%20Book.pdf (pdf)]
===Market Design and Competition between Markets===
*Biais, Bruno (1993), "Price Formation and Equilibrium liquidity in Fragmented and Centralized Markets", Journal of Finance 48, 157-185. [http://www.edegan.com/pdfs/Biais%20(1993)%20-%20Price%20Formation%20and%20Equilibrium%20liquidity%20in%20Fragmented%20and%20Centralized%20Markets.pdf (pdf)]
*Biais, B., D. Martimort and J. Rochet (2000), "Competing Mechanisms in a Common Value Environment", Econometrica 68, 799-838. [http://www.edegan.com/pdfs/Biais%20Martimort%20Rochet%20(2000)%20-%20Competing%20Mechanisms%20in%20a%20Common%20Value%20Environment.pdf (pdf)]
*Parlour and Seppi (2001), "Liquidity based Competition for Order Flow", Review of Financial Studies. [http://www.edegan.com/pdfs/Parlour%20Seppi%20(2001)%20-%20Liquidity%20based%20Competition%20for%20Order%20Flow.pdf (pdf)]
*Foucault, Thierry and T. Gehrig (2008), "Stock Price Informativeness, Cross-Listings and Investment Decisions", Journal of Financial Economics 88, 146-168. [http://www.edegan.com/pdfs/Foucault%20Gehrig%20(2008)%20-%20Stock%20Price%20Informativeness%20Cross%20Listings%20and%20Investment%20Decisions.pdf (pdf)]
*Foucault, Theirry and A. Menkveld (2008), "Competition for Order flow and Smart Order Routing systems," Journal of Finance 63, 119-58 [http://www.edegan.com/pdfs/Foucault%20Menkveld%20(2008)%20-%20Competition%20For%20Order%20Flow%20And%20Smart%20Order%20Routing%20Systems.pdf (pdf)]
===Is trading risk or liquidity priced?===
*Acharya, Viral and L. Pedersen,(2005), "Asset Pricing and Liquidity Risk", Journal of Financial Economics, Vol 77, pp 375-410 [http://www.edegan.com/pdfs/Acharya%20Pedersen%20(2005)%20-%20Asset%20Pricing%20and%20Liquidity%20Risk.pdf (pdf)]
*Amihud, Yakov and Haim Mendelson (1986), "Asset Pricing and the Bid Ask Spread", Journal of Financial Economics, 17, 31-56 [http://www.edegan.com/pdfs/Amihud%20Mendelson%20(1986)%20-%20Asset%20Pricing%20and%20the%20Bid%20Ask%20Spread.pdf (pdf)]
*Amihud, Y., H. Mendelson, and L, Pedersen (2005), "Liquidity and Asset Prices", Foundations and Trends in Finance I. 269-364 [http://www.edegan.com/pdfs/Amihud%20Mendelson%20Pedersen%20(2005)%20-%20Liquidity%20and%20Asset%20Prices.pdf (pdf)]
*Brennan, M. J. and A. Subrahmanyam (1996), "Market Microstructure and Asset Pricing", Journal of Financial Economics 41, 441-464 [http://www.edegan.com/pdfs/Brennan%20Subrahmanyam%20(1996)%20-%20Market%20Microstructure%20and%20Asset%20Pricing.pdf (pdf)]
*Easley, D. S. Hvidkjaer and M. O'Hara (2002), "Is information risk a determinant of Asset returns", The Journal of Finance 58, 2185-2210. [http://www.edegan.com/pdfs/Easley%20Hvidkjaer%20OHara%20(2002)%20-%20Is%20Information%20Risk%20A%20Determinant%20Of%20Asset%20Returns.pdf (pdf)]
*Pastor, L. And R. Stambaugh (2003), "Liquidity risk and Expected Stock Returns", Journal of Political Economy, 111, 642-685. [http://www.edegan.com/pdfs/Pastor%20Stambaugh%20(2003)%20-%20Liquidity%20risk%20and%20Expected%20Stock%20Returns.pdf (pdf)]
*Chordia, T. R. Roll and A. Subrahmanyam (2000), "Commonality in Liquidity", Journal of Financial Economics, 56, 3-28. [http://www.edegan.com/pdfs/Chordia%20Roll%20Subrahmanyam%20(2000)%20-%20Commonality%20in%20Liquidity.pdf (pdf)]
*Chordia, T. R. Roll and A. Subrahmanyam (2001), "Market Liquidity and Trading Activity", Journal of Finance, 56, 501-530. [http://www.edegan.com/pdfs/Chordia%20Roll%20Subrahmanyam%20(2001)%20-%20Market%20Liquidity%20and%20Trading%20Activity.pdf (pdf)]
*Grossman, S. and Miller, M. (1988), "Liquidity and market structure", Journal of Finance 38, 617-633. [http://www.edegan.com/pdfs/Grossman%20Miller%20(1988)%20-%20Liquidity%20And%20Market%20Structure.pdf (pdf)]
*Holmstrom, B. and Tirole, J. (2001), "LAPM - a liquidity based asset pricing model" [http://www.edegan.com/pdfs/Holmstrom%20Tirole%20(2001)%20-%20LAPM%20A%20Liquidity%20Based%20Asset%20Pricing%20Model.pdf (pdf)]
*Easley, David and M. O'Hara (2004) - "Information and the cost of capital", Journal of Finance Vol.59, No 4. p 1553-1583. [http://www.edegan.com/pdfs/Easley%20OHara%20(2004)%20-%20Information%20And%20The%20Cost%20Of%20Capital.pdf (pdf)]
===Slow Moving Capital and Asset prices===
*Gromb, Denis and Vayanos, Dimtri (2002), "Equilibrium and Welfare in Markets with Financially Constrained Arbitrageurs", Journal of Financial Economics [http://www.edegan.com/pdfs/Gromb%20Vayanos%20(2002)%20-%20Equilibrium%20and%20Welfare%20in%20Markets%20with%20Financially%20Constrained%20Arbitrageurs.pdf (pdf)]
*Duffie, Darrell, Semyon Malamud and Gustavo Manso (2009), "Information Percolation with Equilibrium Search Dynamics", Econometrica, Volume 77: 1513-1574. [http://www.edegan.com/pdfs/Duffie%20Malamud%20Manso%20(2009)%20-%20Information%20Percolation%20with%20Equilibrium%20Search%20Dynamics.pdf (pdf)]
*Brunnermeier, Marcus and L. Pedersen (2009), "Market Liquidity and Funding Liquidity", The Review of Financial Studies 22, p. 2201-2238 [http://www.edegan.com/pdfs/Brunnermeier%20Pedersen%20(2009)%20-%20Market%20Liquidity%20and%20Funding%20Liquidity.pdf (pdf)]
===Treasury Auctions===
*Wilson (1979), "Auctions of Shares", Quarterly Journal of Economics, Vol 93 No 4. p 675-689. [http://www.edegan.com/pdfs/Wilson%20(1979)%20-%20Auctions%20of%20Shares.pdf (pdf)]
*Back and Zender (1993), "Auctions of Divisible Goods", Review of Financial Studies, 6 p733-764. [http://www.edegan.com/pdfs/Back%20Zender%20(1993)%20-%20Auctions%20of%20Divisible%20Goods.pdf (pdf)]
*Wang and Zender (2002), "Auctioning Divisible goods", Economic Theory, 19, 673-705.[http://www.edegan.com/pdfs/Wang%20Zender%20(2002)%20-%20Auctioning%20Divisible%20goods.pdf (pdf)]
*Kremer, and Nyborg (2004), "Underpricing and Market Power in Uniform Price Auctions", Review of Financial Studies, 17, 849-877 [http://www.edegan.com/pdfs/Kremer%20Nyborg%20(2004)%20-%20Underpricing%20and%20Market%20Power%20in%20Uniform%20Price%20Auctions.pdf (pdf)]
*Nyborg and Strebulaev (2004), "Multiple Unit Auctions and Short Squeezes", Review of Financial Studies 17, 545-580 [http://www.edegan.com/pdfs/Nyborg%20Strebulaev%20(2004)%20-%20Multiple%20Unit%20Auctions%20and%20Short%20Squeezes.pdf (pdf)]
*Bikhchandani and Huang (1989), "Auctions with Resale", Review of Financial Studies, Vol 2, no3 p311-339 [http://www.edegan.com/pdfs/Bikhchandani%20Huang%20(1989)%20-%20Auctions%20with%20Resale.pdf (pdf)]
*Vickery, William (1961), "Counterspeculation, Auctions and Competitive Sealed Tenders", Journal of Finance [http://www.edegan.com/pdfs/Vickery%20(1961)%20-%20Counterspeculation,%20Auctions%20and%20Competitive%20Sealed%20Tenders.pdf (pdf)]
===Fixed Income Microstructure===
*Duffie, D. N. Garleanu, and L. Pedersen (2005), "Over the Counter Markets", Econometrica 73, 1815-1847 [http://www.edegan.com/pdfs/Duffie%20Garleanu%20Pedersen%20(2005)%20-%20Over%20the%20Counter%20Markets.pdf (pdf)]
*Biais, Bruno and Rick Green (2007), "The microstructure of the Bond Market in the 20th Century" [http://www.edegan.com/pdfs/Biais%20Green%20(2007)%20-%20The%20Microstructure%20Of%20The%20Bond%20Market%20In%20The%2020th%20Century.pdf (pdf)]
*Biais, Bruno, Fany Declerk, J. Dow, E. Van Thadden (2006), "Transparency, Liquidity and Information in Dealer markets", Working paper [http://econpapers.repec.org/paper/idewpaper/7543.htm (link)]
*Green, Rick, B. Hollifield, and N. Schurhoff (2007), "Dealer Intermediation and Pice Behavior in the aftermarket for new bond issues", Journal of Financial Economics [http://www.edegan.com/pdfs/Green%20Hollifield%20Schurhoff%20(2007)%20-%20Dealer%20Intermediation%20And%20Price%20Behavior%20In%20The%20Aftermarket%20For%20New%20Bond%20Issues.pdf (pdf)]
*Green, Rick, B. Hollifield, and N. Schurhoff (2007), "Financial Intermeidation and the costs of trading in an opaque market", Review of Financial Studies. [http://www.edegan.com/pdfs/Green%20Hollifield%20Schurhoff%20(2006)%20-%20Financial%20Intermediation%20And%20The%20Costs%20Of%20Trading%20In%20An%20Opaque%20Market.pdf (pdf)]
*Vayanos, Dimitri and P.O. Weill (2008), "A search based theory of the on-the-run phenomenon", Journal of Finance 63, pp.1361-1398. [http://www.edegan.com/pdfs/Vayanos%20Weill%20(2008)%20-%20A%20Search%20Based%20Theory%20Of%20The%20On%20The%20Run%20Phenomenon.pdf (pdf)]
===Liquidity, Trade and Contracts===
*Chemla, G. and C. Hennessey (2010), "Security Design, Liquidity and the Informational Role of Prices", Working paper [http://www.edegan.com/pdfs/Chemla%20Hennessey%20(2010)%20-%20Security%20Design%20Liquidity%20and%20the%20Informational%20Role%20of%20Prices.pdf (pdf)]
*Chemla, G. and C. Hennessey (2010), "Privately optimal Securitization and Publicaly Suboptimal Risk Sharing" [http://www.edegan.com/pdfs/Chemla%20Hennessey%20(2010)%20-%20Privately%20optimal%20Securitization%20and%20Publicaly%20Suboptimal%20Risk%20Sharing.pdf (pdf)]
*Edmans, Alex and G. Manso (2011), "Governance Through Trading and Intervention: A Theory of Multiple Blockholders", Review of Financial Studies, forthcoming. [http://www.edegan.com/pdfs/Edmans%20Manso%20(2009)%20-%20Governance%20Through%20Trading%20and%20Intervention%20A%20Theory%20of%20Multiple%20Blockholders.pdf (pdf)]
*Faure-Grimaud, Antoine and D. Gromb (2004), "Public Trading and Private Incentives", Review of Financial Studies 17(4) 985-1014 [http://www.edegan.com/pdfs/FaureGrimaud%20Gromb%20(2004)%20-%20Public%20Trading%20and%20Private%20Incentives.pdf (pdf)]
*Parlour, C. and G. Plantin (2008), "Loan Sales and Relationship Banking", Journal of Finance, Volume 63(3), 1291-1314. [http://www.edegan.com/pdfs/Parlour%20Plantin%20(2008)%20-%20Loan%20Sales%20and%20Relationship%20Banking.pdf (pdf)]
*Admati, Anat and Paul Pfeiderer (2009), "The Wall street Walk and Shareholder Activism: Exit as a Form of Voice", Review of Financial Studies, 22 (7), pp.2645-2685. [http://www.edegan.com/pdfs/Admati%20Pfeiderer%20(2009)%20-%20The%20Wall%20street%20Walk%20and%20Shareholder%20Activism%20Exit%20as%20a%20Form%20of%20Voice.pdf (pdf)]
