Journal of Economics and International Finance
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Article Number - 4DC05131863


Vol.1(1), pp. 001-013 , June 2009

ISSN: 2006-9812



Full Length Research Paper

Price discovery, trading costs and insider trading: Evidence from a thin emerging market


Mohamed Derrabi* and Samir Agnaou




School Of Business Administration, Al-Akhawayn University in Ifrane, P. O. Box 2148, Ifrane 53000, Morocco.


Email: M.Derrabi@aui.ma






 Accepted: 14 May 2009  Published: 30 June 2009

Copyright © 2009 Author(s) retain the copyright of this article.
This article is published under the terms of the Creative Commons Attribution License 4.0


 

This research examines the impact of continuous trading system versus fixing system on liquidity, volatility, pricing error and order flows. Our results show that the continuous system show better price determination than the fixing system. This result is surprising. Indeed, temporal consolidation and the absence of effect of noisy orders should have led to a reverse conclusion. We suggest that in thin market, insiders and large investors take advantage of small investors at the opening. These later are usually liquidity traders and therefore are more concerned about the execution of their transactions rather the transaction prices and thus bear higher trading costs. In opposite most of participants in the continuous period are strategic traders. Insiders and large investors take advantage of multilateral trading mechanism during the opening (fixing) period at the cost of small investors. Our analysis of the trading costs shows that trading in thin market encompasses high trading costs because of low market liquidity, low trading volume, high volatility, significant pricing error and low market capitalisation that are specific to these markets.

 

Key words: Market microstructure, market efficiency, volatility, emerging markets. 


APA (2009). Price discovery, trading costs and insider trading: Evidence from a thin emerging market. Journal of Economics and International Finance, 1(1), 001-013.
Chicago Mohamed Derrabi and Samir Agnaou. "Price discovery, trading costs and insider trading: Evidence from a thin emerging market." Journal of Economics and International Finance 1, no. 1 (2009): 001-013.
MLA Mohamed Derrabi and Samir Agnaou. "Price discovery, trading costs and insider trading: Evidence from a thin emerging market." Journal of Economics and International Finance 1.1 (2009): 001-013.
   
DOI
URL http://academicjournals.org/journal/JEIF/article-abstract/4DC05131863

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