Market Microstructure Theory
$16.54
| Author(s) | |
|---|---|
| Format |
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| Pages |
291 |
| Published Date |
1995 |
Market Microstructure Theory analyzes the development of microstructure theory from the initial inventory models through the information-based and game-theoretic paradigms of more recent research. This book provides a comprehensive guide to the theoretical work in this important area of finance.
Author’s Introduction:
Market Microstructure Theory began as the basis for a Ph.D. course in Market Microstructure that I taught at Cornell University. My motivation then, as it is now, was to provide a unified exposition and examination of the major models and theories used in market microstructure. These modeling issues are extensive, as microstructure has evolved from focusing primarily on inventorybased problems to being focused more recently on issues typically associated with information economics.
The literature has now developed to the point that there are several widely used paradigms, but the generality of their results, and hence their applicability, is not well understood. Moreover, the complexity of the models requires a familiarity with rational expectations models, Bayesian learning, and game theory to appreciate their behavior. For both theorists and empirical researchers, there appeared a need for a unified treatment of market microstructure theory, whence the origins of this book.
In this development, I explain how the main theoretical models work, the evolution of the literature to that point, the strengths and weaknesses of each approach, and the issues left unaddressed. While this involves extensive discussion of the literature, the book is not intended to be the definitive literature survey of the area. My goal is the more modest (and more achievable) one of providing a general perspective on the development and evolution of market microstructure theory.
In pursuing this goal, I have chosen to focus on the topics that I find most interesting in the field. This has the somewhat unfortunate consequence that some work (particularly my own) is emphasized, while other work is perhaps not given the attention it deserves. My focus only on theoretical work also means that some of the most provocative work in market microstructure is not included simply because it is empirical in nature. I freely acknowledge these difficulties, and hope that the sheer dimension of the field provides at least some justification for these shortcomings.
Contents:
- Markets and Market Making
- Inventory Models
- Information-Based Models
- Strategic Trader Models I: Informed Traders
- Strategic Traikr Models II: Uninformed Traders
- Infonnation and the Price Process
- Market Viability and Stability
- Liquidity and the Relationships Between Markets
- Issues in Market Performance
Market Microstructure Theory By Maureen Ohara pdf
15 reviews for Market Microstructure Theory
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Nasir Brennan (verified owner) –
Good quality.
Wrenley Rodriguez (verified owner) –
I purchased this book with a view to understand the nitty gritty of orderflow together with how prices move and the role of the various market participants. The author looks at some models of the market and roles of various participants along mathametical lines so that for lay readers it doesn’t gel well. If you are looking for Phd stuff than it’s fine but not for the lay reader interested in knowing how markets work.
Braylon Grant (verified owner) –
Clearly explains different approaches to understanding the inner workings of stock markets (inventory and information based models). The models are explained mainly in words but there equations and technical appendices so the reader is left with a good grasp of the subject matter. Stimulating book.
Celine Yates (verified owner) –
The book is an excellent introduction to the microstructure and its evolution over the last few years. Generally speaking, one would be able to get the broad overview of inventory, information & adversorial based modelling which may be put to employ practically.
Strongly recommend this book for those who want to learn about market microstructure and beginners to automated & electronic trading. I also think this book would be valuable to traditional managers as well.
For those at intermediate or higher levels, I would suggest reading research papers and individual bloggers to further develop skillset. Nonetheless, a good reference to have on the shelf.
Thanks for the book Maureen.
Bennett Phelps (verified owner) –
great
Alaina Atkins (verified owner) –
Very very good
Cason Booth (verified owner) –
I do not imagine a faculty of management’s library without this book avalailable for M.Sc. and Ph.D. students.
As opposed to another reviewer, I really liked the structure. Starting with inventory problems, then dealing with asymetric information and finally going thru agent’s strategic behavior; you get the big picture regarding the main issues in market microstructure.
Maybe a bit more detail and explanations on the derivation of some basic models would have been more value added. Unfortunately, you must move on to the original published academic paper to get a fully understanding of any particular model. You cannot rely exclusively on the book.
Henry Berg (verified owner) –
This book is probably best for someone with some formal economics or mathematics training. Or at least a reader with a strong interest in this field. If you are interested in microstructure and want a good review of current models, this book is for you.
Brycen McCoy (verified owner) –
If you are serious about learning Market Microstructure this book is a great preview to reading the actual papers. It gives you enough intuition that you can approach classic papers by Stoll, Glosten and Milgrom, Easley and O’Hara, Kyle, etc.
Also, you do not need a serious knowledge of the subject matter to open this book (although it helps to have an undergraduate level investments class under your belt). However, finance prerequisites aside, you should be prepared with a fairly thorough knowledge of microeconomics and statistics. A semester or two at a good graduate economics program should do the trick. Otherwise, this can be a tough read.
Laney Barton (verified owner) –
Poorly written, with very limited understanding of how practitioners interact with markets. Total academic noise. A must skip.
Cassius Delacruz (verified owner) –
This year is the fifteenth anniversary of publication of the “Market Microstructure Theory.” Since then, many books on the subject appeared, most prominently Hasbrouck’s “Empirical Market Microstructure” (2007) for advanced readers and L. Harris’ textbook for the first acquaintance with the subject(2002), but none, as yet, can substitute for readability and mathematical presentation of MMT. I had not obtain yet a copy of DeJong’s book (2009), which seems interesting in its scope and composition. Even this author published in 2009 his error-ridden and overpriced (not my fault!) book–in which I attempted to organize material appearing since 1995 in a logical sequence–but failed. I give it four stars only because if I give five, where should we put La Divina Comedia and Anna Karenina? But the whole subject of microstructure is in dire need of work summarizing the latest achievements and outlining the failed promises. Nowhere it is as pertinent as in the field of high-frequency trading that did not exist when M. O’Hara wrote her classic.
Elodie Larsen (verified owner) –
This book does not need praise. It is widely considered the best introduction to the academic work in market microstructure. The only reason I’ve listed this review is to counter the unfortunate review already listed. This book is perfect for the researcher or PhD student interested in the issues addressed in market microstructure. Although the book is not written for the average mba student, a careful read would benefit anyone interested in the structure of markets.
Mckenzie Powell (verified owner) –
I have both an economics and statistics background and I found this a tough read for several reasons.
Economic students would love this book.
Most of my issues are realted to the writing style and presenation of the information. The style is academic and is not a pleasure read by any means. The other issue is that you almost have to read this in order. Some of the formulas are not obvious, and they are explained in one paragraph 100 pages ago, and that is it.
Most of the math is statistics and probability, so if you have a good background in the math then it is not as bad.
The other issue I had with it is the endless references to other papers, yes I know they have to be cited, but I wish there would be more of a background in some of the instances..
So why the 4 stars.. Because there is alot of great information in this for everyone. The appendix on Bayesian is worth getting the book alone. The authors analysis is also priceless.
While at this point the market is full of books cover this subject, and this is probably dated in some aspects, it is still worth the read.
Even if you don’t understand the math, the authors coverage of the material and discussion provides valuable insight.
Archer Farley (verified owner) –
High frequency trading involves a deep understanding about the dynamics of the double auction book, how orders are being placed in the queue, the probability of being filled, etc. This book is indispensible and unique on this regard. No high frequency trader will survive these days’ market microstructure unless she/he is familiar with the models and concepts discussed in this brilliant work.
A lifetime of brilliant research is condensed into this book. Those who dismiss it because it is theoretically sound and rigurous will be punished when that same theory they didn’t care to understand plays with their portfolio.
I’m glad to say that this book saved my day on May 6th 2010, the same day when Goldman Sachs, Bank of America, Morgan Stanley and many others lost hundreds of millions of dollars. Additional proof that this book is today more relevant than ever.
Emmalyn Deleon (verified owner) –
it is about market and market maker modeling where each step is described in English and expressed symbolically using mathematics.