Book review: market liquidity: theory, evidence, and policy

The way in which securities are traded is very different from the idealized picture of a frictionless and self-equilibrating market offered by the typical finance textbook. Market Liquidity aims to confront many puzzling phenomena in securities markets and uses the analytical tools and empirical methods of market microstructure to understand them. These include issues such as why liquidity changes over time, why large trades move prices up or down, and why these price changes are subsequently reversed, and why some traders willingly disclose their intended trades while others hide them. Reviewed by Luis Boscán.