Trading frictions and market structure : an empirical analysis

Market structure affects the informational and real frictions faced by traders in equity markets. Using bid-ask spreads, we present evidence which suggests that while real frictions associated with the costs of supplying immediacy are less in order-driven systems, informational frictions resulting from increased adverse selection risk are considerably higher in these markets. Firm value, transaction size and order location are all major determinants of the trading costs borne by investors. Consistent with the stealth trading hypothesis of Barclay and Warner (1993), we report that informational frictions are at their highest for medium size trades that go through the order book. Finally, while there is no doubt that the total costs of trading on order-driven systems are lower for very liquid securities, the inherent informational inefficiencies of the trading format should not be ignored. This is particularly true for the vast majority of small to mid-size stocks that experience infrequent trading and low transaction volume

Village politics: Heterogeneity, leadership and collective action

When comparing stratified Fulani village societies, little direct relationship between the degree of heterogeneity and the success in collective action was found, except when heterogeneity among leadership and elite groups was compared. Small size and homogeneous groups do not seem to be general preconditions for stronger ability to perform collectively. First, it was found that homogeneity among elite groups enhanced capacity for collective action. Second, it was when heterogeneity in economic interests between elite groups intensified and coincided with other dimensions of heterogeneity that collective action became difficult to achieve, such as heterogeneity in economic wealth, access to land and common-pool resources, and agreement over authority of the leadership. Third, collective action was enhanced by political elites and leaders being a bit better endowed and a bit wealthier than the average community members, but not when their assets were mobilised against the economic interests and sense of fairness of other social groups. Fourth, the coordination power of the leadership related to the management of common-pool resources was undermined when leadership had extensive recourse to state officials external to the village community, underscoring the importance of autonomy.