Title: Impact Of Market Microstructure On Price Efficiency And Liquidity In Emerging Capital Markets
Authors: Ighoyivwi Matthias O. And Ehiedu, Victor C Ph.D
Volume: 9
Issue: 5
Pages: 202-208
Publication Date: 2025/05/28
Abstract:
This study investigates the impact of market microstructure on price efficiency and liquidity in emerging capital markets. Market microstructure refers to the mechanisms and protocols that facilitate the trading of financial assets. It includes trading systems, order types, regulatory frameworks, transparency levels, and the behaviour of market participants. In emerging markets, where financial systems are still developing, inefficiencies and low liquidity often hinder the optimal functioning of capital markets. This research examines how these microstructural elements influence market outcomes, using data from selected emerging economies between 2010 and 2024. Employing both descriptive analysis and panel regression techniques, the study finds that enhancements in market microstructure significantly improve price efficiency and liquidity, leading to greater investor confidence and deeper capital markets. The findings offer practical implications for regulators and stock brokers seeking to enhance market performance in developing financial environments.