| This dissertation examines the theoretical and empirical implications of many realistic financial frictions, like price manipulation, information asymmetry and heterogeneity, and imperfect competition among informed traders, for the process of price formation in domestic and international asset and currency markets. In particular, two issues of relevance to researchers and practitioners alike are explored in detail, financial contagion (and, more generally, excessive comovement, that is beyond the degree justified by economic fundamentals) and Central Bank intervention. Implications of the results of the analyses are also derived for the actions and choices of policy-makers and regulators in domestic and international financial markets. The dissertation is made of three essays: (1) Imperfect Competition, Information Heterogeneity, and Financial Contagion; (2) Central Bank Intervention and the Intraday Process of Price Formation in the Currency Markets; (3) Informative Trading or Just Noise: An Analysis of Currency Returns. Market Liquidity, and Transaction Costs in Proximity of Central Bank Interventions. (Abstract shortened by UMI.)... |
