Topics in Market Microstructure

Market microstructure is a study of the processes through which the investors' predictions of the future and their trading strategies determine market prices. Recent advances in market microstructure have been made possible by the proliferation of computers in the trading process and the availability of high quality financial data. This has attracted researchers from various disciplines (e.g., finance, physics, computer science) creating an interdisciplinary research arena with the common goal of understanding a very complicated - yet very well documented by data - system of a large number of interacting intelligent agents. This book contains four papers in which the authors investigate the interactions of investors' strategies and the resulting aggregate properties of transaction prices.