Some links in this page have not yet been updated.
FINC-GB.4192.01 Fall Semester 2011
Stern School of Business, NYU
Professor Joel Hasbrouck
The class meets T, Th 1:30-3:00 in KMEC 5-75. This is a half-credit course. The first meeting is Tuesday, September 6; the last meeting is Thursday, October 20. There is no class on Thursday, September 29.
The deliverables are the empirical market data exercises (see below) and the final problem set.
Market microstructure is the subfield of financial economics that deals with the trading mechanisms used for securities. Most of the equilibrium and no-arbitrage results in finance are predicated on the possibility of trade. With real-world mechanisms, though, trading is costly. These costs affect portfolio formation and the pricing of assets. By changing or regulating the mechanism, it may be possible to prevent market failures, reduce trading costs and move closer to first-best equilibria. Moreover, some component of the trading cost is informational. The joint dynamics of prices and trades can yield insights into information that are otherwise difficult to obtain. This course is a survey of modern trading institutions and the economic lines of thought that have proven useful in understanding them.
This is a seminar course and I'll be guiding you through some of the key papers in the field. The deliverables will include a final problem set and an empirical project (see marketDataAnalysis).
The text for the course is my book Empirical Market Microstructure. New York, Oxford University Press (EMM).
Useful background books in microstructure include:
Books that cover econometric techniques useful in market microstructure include:
I recently taught an MBA class (Financial Markets: Structures and Dynamics). This class was shorter, and did not dwell on the economic and statistical properties of market data. But it did cover institutions in some detail. The class web site is at: Financial Markets: Structure and Dynamics.
Notes: Liquidity and asset pricing part 1 part 2
Books on Bayesian estimation