Market microstructure focuses on the processes and outcomes of asset exchange. It examines how explicit trading rules impact price formation. Traders and investors utilize its findings to optimize trading algorithms, reduce performance drag, improve stock selection processes and portfolio construction strategies, as well as use its findings for investment selection purposes. Market microstructure includes liquidity, transaction costs, prices, quotes and trading volumes as examples of market microstructure. Other characteristics may include information availability, adverse selection and the monopoly power of market makers. Asset Pricing Market microstructure research investigates the processes…
Read MoreThe Role of Market Microstructure in Investment Decision-Making
