Market Microstructure with Pushkal Pandey

At this event we were honoured to host Pushkal Kumar Pandey, Associate Professor of Finance, who gave us an extensive peek into the stock market. Little did we know that there’s more to trading than just buying and selling stocks. From understanding the nature of the fundamental volatility of the markets to styles of informed trading, we covered a range of topics that the books never really shared with us.

Market microstructure is the study of the process and outcomes of exchanging assets under explicit trading rules. It investigates trading and its rules. But we knew that much. Here’s what we were surprised to learn; turns out, trading is a zero-sum game. One man’s profit is another man’s loss pretty literally in the stock market. And there’s more to investment than just stocks, it also ivolves intellectual properties, options, and the most interesting one being pollution emission rights. Yes, even we want Greta Thunberg to be a part of the regulatory board of this market. What’s oddly satisfying is that the market is functioning on a paradox. An efficient market is one in which the prices reflect all the information there is. In such a market, there’s no incentive for traders to obtain information. The notion of being able to beat the market is flawed and people should just buy the market index. However, doing so makes individual stocks stable and ensures that information isn’t translated into market movements. Thus, the paradox.