Grey rhinos in financial markets and venue selection: the case of COVID-19

Authors: Ibikunle, Gbenga;

Rzayev, Khaladdin

Source: The University of Edinburgh

Full text

: https://www.research.ed.ac.uk/portal/en/publications/grey-rhinos-in-financial-markets-and-venue-selection-the-case-of-covid19(bd3acc4f-6047-4401-a233-87e35a3c7117).html

Abstract

We investigate the effects of the COVID-19-induced shock in financial markets on aggregate venue selection/venue market share and market quality. We find that the shock is linked with an economically significant loss of market share by dark pools to lit exchanges. In line with theory, the loss appears linked to an increase in lit market volatility and a search for immediacy by traders trading in stocks with dark trading access. The market quality implications of the loss in dark market share are mixed and economically significant: while it improves liquidity in the lit market, it results in a loss of informational efficiency.

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Ibikunle, G. & Rzayev, K. 2020, Grey rhinos in financial markets and venue selection: the case of COVID-19, The University of Edinburgh. Available at: https://www.research.ed.ac.uk/portal/en/publications/grey-rhinos-in-financial-markets-and-venue-selection-the-case-of-covid19(bd3acc4f-6047-4401-a233-87e35a3c7117).html

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Repository URI: https://www.research.ed.ac.uk/portal/en/publications/grey-rhinos-in-financial-markets-and-venue-selection-the-case-of-covid19(bd3acc4f-6047-4401-a233-87e35a3c7117).html