Changes
Jump to navigation
Jump to search
→Overview
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 finance 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 { as this does not represent my comparative advantage.1 After the crisis, researchers in other �elds fields (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 �eldsfields. Given the brevity of the course, this list is both short
and idiosyncratic.
