2017-04-01
The dynamics of market efficiency
Publication
Publication
The Review of Financial Studies , Volume 30 - Issue 4 p. 1151- 1187
We study the dynamics of high-frequency market efficiency measures. We provide evidence that these measures comove across stocks and with each other, suggesting the existence of a systematic market efficiency component. In vector autoregressions, we show that shocks to funding liquidity (the TED spread), hedge fund assets under management, and a proxy for algorithmic trading are significantly associated with systematic market efficiency. Thus, stock market efficiency is prone to systematic fluctuations, and, consistent with recent theories, events and policies that impact funding liquidity can affect the aggregate degree of price efficiency.
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| doi.org/10.1093/rfs/hhw085, hdl.handle.net/1765/99752 | |
| ERIM Top-Core Articles | |
| The Review of Financial Studies | |
| Organisation | Rotterdam School of Management (RSM), Erasmus University |
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Rösch, D.M. (Dominik M.), Subrahmanyam, A. (Avanidhar), & van Dijk, M. (2017). The dynamics of market efficiency. The Review of Financial Studies, 30(4), 1151–1187. doi:10.1093/rfs/hhw085 |
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