Liquidity, Markets and Trading in Action: An Interdisciplinary Perspective

Abstract

This book addresses four standard business school subjects: microeconomics, finance, macroeconomics, and information systems as they relate to trading, liquidity, transaction costs, and market structure. It also presents an interactive simulation model of equity market trading. What does our treatment of these different subjects have in common? In each, we consider the impact of trading costs and other impediments (that we call “frictions”) on market outcomes. A second commonality of the four topics is that each is presented with reference to one specific financial market – the equity market. We also consider the effect of regulation on equity market structure. Addressing these topics can shine a bright light on how a real-world market functions, and your interaction with the simulation tool should be both informative and fun. Each of the chapters is designed so it can be used as a standalone module in an existing finance, economics, or information science course. But, while each chapter is self-contained, there are common threads across the book. We address an array of key thoughts from different angles, and reading the entire book will enable you to achieve a more comprehensive understanding of the workings of a real-world financial market.