The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Market Microstructure

  • Maureen O’Hara
Reference work entry


Market microstructure research uses the rules and trading protocols of markets to analyse price formation in asset markets. Microstructure research shows how markets provide liquidity and price discovery, and how prices come to reflect information. Of particular importance to this process is how market participants learn from market data. Microstructure researchers often consider issues related to market structure, in particular how changing features of the market affect the price process. Empirical microstructure research uses high-frequency data-sets, and develops statistical approaches to deal with such data.


Adverse selection Asset pricing Asymmetric information Auto-conditional duration model Bayes’ rule Bid–ask markets Bonds Censored sampling Electronic commerce Market microstructure Inventory models Inventory risk Liquidity Market structure Noise traders Options Price discovery Rational expectations Sequential models Spreads 

JEL Classifications

G10 G34 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Maureen O’Hara
    • 1
  1. 1.