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| Author: | Bossaerts, P. Fine, L. Ledyard, J. |
| Title: | Inducing liquidity in thin financial markets through combined-value trading mechanisms |
| Journal: | European Economic Review
2002 : OCT, VOL. 46:9, p. 1671-1696 |
| Index terms: | LIQUIDITY PORTFOLIO MANAGEMENT FINANCIAL MARKETS FINANCE |
| Language: | eng |
| Abstract: | Asset pricing theory hypothesizes that investors are only interested in portfolios; individual securities are evaluate only in terms of their contribution to portfolio risk and return. The authors study the performance of the combined-value trading (CVT) mechanism experimentally and compare it to the performance of parallel, unconnected double auctions in experiments with similar parameterization and either a similar number of subjects or substantially thicker markets. The authors present evidence that their portfolio trading mechanism facilitates equilibration to the extent that the thicker markets do. Inspection of order submission and trade activity reveals that subjects manage to exploit the direct linkages between markets enabled by the CVT system. |
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