Title

Liquidity Trading In Market Microstructure Theory

Keywords

Liquidity trading; Market microstructure

Abstract

Liquidity trading is an important component of market microstructure models. In most cases, its role is primarily to ensure existence of equilibrium and therefore that trading occurs among asymmetrically informed agents. While most market microstructure models allege that agents trade based upon rational expectations, the rationality of the type of liquidity trading assumed in these models remains to be verified. Specifically, liquidity traders are often assumed to submit price-inelastic orders for reasons exogenous to the model at hand. But whether price-inelastic trading is consistent with rational utility maximizing behavior remains to be shown. © 1999 Kluwer Academic Publishers.

Publication Date

1-1-1999

Publication Title

Review of Quantitative Finance and Accounting

Volume

13

Issue

1

Number of Pages

29-38

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1023/A:1008396319798

Socpus ID

53149139917 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/53149139917

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