Doctoral Dissertations

Date of Award

8-2019

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Major

Business Administration

Major Professor

Andy Puckett

Committee Members

Eric Kelley, David Maslar, Matthew Harris

Abstract

This dissertation examines the effect of two hallmarks of modern market structure, dark trading and fragmentation. The first chapter looks at the effects of dark trading on market quality on an ordinary trading day. Our research design is predicated on a regulatory pilot spearheaded by the Securities and Exchange Commission to examine what happens to liquidity and price efficiency following a large negative exogenous shock to dark trading. The second chapter investigates the effects of dark trading and fragmentation on the resiliency of stocks facing a an aggregate market shock. Prior literature has found cross sectional variation in liquidity dislocations during a market downturn based on characteristics of liquidity suppliers. However, the effects of where a stock trades on its resiliency is unknown due to data limitations. Concerns about dark trading and market fragmentation prompted regulators to make a highly granular dataset available that discloses dark trading statistics. My study is the first to ask what we can learn about stock resiliency from where stocks trade. This question was previously unanswerable using public data. I fill this gap in the literature using publically available data provided by FINRA to map out individual stock patterns and use these characteristics to explain cross sectional variation in liquidity dislocations following a negative shock to the aggregate market.

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