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Title: Fragmentaion and Stability of Market
Authors: Ladley, Daniel
Lensberg, Terje
Palczewski, Jan
Schnke-Hoppé, Klaus Reiner
First Published: 2015
Publisher: Elsevier
Citation: Journal of Economic Behavior and Organization, in press
Abstract: Trading skills are highly rewarded in practice but largely ignored in theoretical models of financial markets. This paper demonstrates the importance of skills by examining their interaction with market fragmentation and market stability. We consider a computational model where traders' abilities to accurately price assets are endogenous. In contrast to models that do not consider skills, we find that centralising markets can lead to higher price volatility and less resilience to shocks because it increases the equilibrium proportion of unskilled traders.
ISSN: 0167-2681
Links: TBC
Embargo on file until: 1-Jan-10000
Version: Post-print
Status: Peer-reviewed
Type: Journal Article
Rights: Copyright © 2015, Elsevier. Deposited with reference to the publisher’s archiving policy available on the SHERPA/RoMEO website.
Description: 18 mth embargo from publication.
Appears in Collections:Published Articles, Dept. of Economics

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