Abstract

http://ssrn.com/abstract=1430573
 
 

References (25)



 


 



Market Quality and Contagion in Fragmented Markets


Rohit Rahi


London School of Economics - Department of Finance; London School of Economics & Political Science (LSE) - Financial Markets Group

Jean-Pierre Zigrand


London School of Economics - Department of Finance and Financial Markets Group

January 24, 2013


Abstract:     
Financial market liquidity has become increasingly fragmented across multiple trading platforms. We propose an intuitive welfare-based market quality metric that can properly aggregate local market conditions across both securities and trading venues. Our analysis rests on a general equilibrium model with segmented markets. Arbitrageurs reap profits by effectively providing intermediation services (i.e. “liquidity”). Our market quality measure is equal to the additional consumption enjoyed by investors as a result of this intermediation, and can be represented by means of a number of observable proxies. The model is especially well-suited to study the contagion-like effects of liquidity shocks.

Number of Pages in PDF File: 37

Keywords: Fragmented markets, intermediation, arbitrage, liquidity, contagion

JEL Classification: G10, G20, D52, D53

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Date posted: July 7, 2009 ; Last revised: January 25, 2013

Suggested Citation

Rahi, Rohit and Zigrand, Jean-Pierre, Market Quality and Contagion in Fragmented Markets (January 24, 2013). Available at SSRN: http://ssrn.com/abstract=1430573 or http://dx.doi.org/10.2139/ssrn.1430573

Contact Information

Rohit Rahi (Contact Author)
London School of Economics - Department of Finance ( email )
Houghton Street
London, WC2A 2AE
United Kingdom
+44 20 7955 7313 (Phone)
+44 20 7955 7420 (Fax)
HOME PAGE: http://vishnu.lse.ac.uk/
London School of Economics & Political Science (LSE) - Financial Markets Group ( email )
Houghton Street
London WC2A 2AE
United Kingdom
Jean-Pierre Zigrand
London School of Economics - Department of Finance and Financial Markets Group ( email )
Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6201 (Phone)
+44 20 7955 7420 (Fax)
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