Ravi Bhushan Trading Costs, Liquidity, and Asset Holdings

Annotation

Whilst the greatest effort has been made to ensure the quality of this text, due to the historical nature of this content, in some rare cases there may be minor issues with legibility. In the last few years there has been a big surge in trading activity in financial markets across the world and this trend is likely to continue as the financial marketplace gets more globalized. As trading activity increases and as more and more investors are attracted to these markets, the liquidity and trading costs in such markets become issues of great importance. The objective of this paper is to examine the factors that affect the liquidity of asset markets and the costs of trading in them. An attempt is made to answer questions such as: why are some assets more liquid than others; when faced with liquidity needs or excess liquidity, how does a trader decide on the amounts of the various assets to be traded; and what role does informed trading play in influencing the cost of trading and trading volume in a security?