Dr. D.M. (Dominik) Rösch
PhD Track Market Efficiency and Liquidity
The main theme of this thesis is to investigate the interaction between market efficiency and liquidity. In particular to document time- and cross-sectional variation in market efficiency, and whether individual stock efficiency co-moves with aggregate market efficiency; to investigate why inefficiencies arise and how trading against these inefficiencies affects market liquidity. Theory predicts that arbitrage improves financial market liquidity when arbitrage opportunities arise as a result of temporary demand shocks and worsens liquidity when arbitrage opportunities arise as a result of differences in information. My analysis suggests that around 70% of the arbitrage opportunities arise as a result of demand shocks. Consistent with theory, I then show that an increase in arbitrage activity is associated with a reduction in market order imbalance and an improvement in liquidity.
- Keywords
- market efficiency, arbitrage, liquidity, fragmentation, market integration, return predictability, commonality, informed trading, private information, portfolio optimization model
- Time frame
- 2010 - 2015
Events (2)
Address
411 Capen Hall
14260-1604 Buffalo, New York
United States