Advances in Economics, Management and Political Sciences

- The Open Access Proceedings Series for Conferences


Proceedings of the 7th International Conference on Economic Management and Green Development

Series Vol. 44 , 10 November 2023


Open Access | Article

The Impact Automated Market Makers on Stock Prices and Returns

Chuanhao Zhou * 1
1 University of Electronic Science and technology

* Author to whom correspondence should be addressed.

Advances in Economics, Management and Political Sciences, Vol. 44, 73-88
Published 10 November 2023. © 2023 The Author(s). Published by EWA Publishing
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Citation Chuanhao Zhou. The Impact Automated Market Makers on Stock Prices and Returns. AEMPS (2023) Vol. 44: 73-88. DOI: 10.54254/2754-1169/44/20232187.

Abstract

Examining the impact Automated market makers have on stock prices and returns is the focus of this study. Automated market makers are state-of-the-art financial instruments that facilitate the bilateral trade of digital assets in the DeFi industry. Market participants trade against pools of liquidity rather than individual buyers and sellers. Market returns, price changes, and liquidity levels will be analyzed both before and after the introduction of automated market makers. We’ll take a look at how automated market makers affect transaction costs, liquidity, and trading volume. Major stock markets that employ automated market makers will be surveyed for data collection and analysis. The effect of liquidity ratios on market performance will be studied statistically. Understanding the impact Automated market makers have on market returns and pricing is critical for traders, regulators, and researchers. Improved investment returns and the development of decentralized financial ecosystems may result from incorporating the results into market structure and liquidity. The implementation of automated market makers on centralized stock exchanges has been aimed at enhancing market efficiency. This research investigates the impact of automated market makers on stock prices and returns. Using monthly market returns from the closing index and equity price data, the study examines the effects before and after the implementation of automation. The study utilizes a longitudinal research design, analyzing listed firms with data spanning the study period. The findings contribute to the understanding of the influence of automated market makers on stock prices and returns, particularly in regions with limited literature on the subject.

Keywords

Automated Market Makers (AMMs), liquidity ratios, stock markets, market returns, price movements

References

1. Adams, Hayden (11 February 2019). “A short history of Uniswap”. Uniswap.

2. G.Woodetal.,“Ethereum:Asecuredecentralisedgeneralisedtransactionledger,”Ethereumprojectyellowpaper,vol.151,n .2014,pp.1–32,2014.

3. Helen, S., Hawkins, R., & Sato, N. (1997). The impact of technology and regulation on the geographical scope of stock exchanges. Journal of Banking & Finance, 21(6), 795-815.

4. Sioud, O., & Hamied, F. A. (2003). Financial markets in the Middle East. Routledge.

5. De la Torre, A., Gozzi, J. C., & Schmukler, S. L. (2006). Capital market development: Whither Latin America?. World Bank Publications.

6. Jain, V. (2005). Automation in securities industry. Indian Journal of Commerce, 58(1), 27-40.

7. Nazlioglu, S., Payne, J. E., Lee, J., Rayos-Velazquez, M., & Karul, C. (2021). Convergence in OPEC carbon dioxide emissions: Evidence from new panel stationarity tests with factors and breaks. Economic Modelling, 100, 105498.

8. Yaya, O. S., Ogbonna, A. E., & Mudida, R. (2019). Hysteresis of unemployment rates in Africa: new findings from Fourier ADF test. Quality & Quantity, 53(6), 2781-2795.

9. Budiawati, Y. (2021, March). Factors Influencing Risk of Shallot by Using Arch Garch and Var. In 2nd and 3rd International Conference on Food Security Innovation (ICFSI 2018-2019) (pp. 33-38). Atlantis Press.

10. Shephard, N. (2020). Statistical aspects of ARCH and stochastic volatility. In Time series models (pp. 1-68). Chapman and Hall/CRC.

11. Lee, H. T., & Lee, C. C. (2022). A regime-switching real-time copula GARCH model for optimal futures hedging. International Review of Financial Analysis, 84, 102395.

Data Availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. Authors who publish this series agree to the following terms:

1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this series.

2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this series.

3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See Open Access Instruction).

Volume Title
Proceedings of the 7th International Conference on Economic Management and Green Development
ISBN (Print)
978-1-83558-109-4
ISBN (Online)
978-1-83558-110-0
Published Date
10 November 2023
Series
Advances in Economics, Management and Political Sciences
ISSN (Print)
2754-1169
ISSN (Online)
2754-1177
DOI
10.54254/2754-1169/44/20232187
Copyright
© 2023 The Author(s)
Open Access
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited

Copyright © 2023 EWA Publishing. Unless Otherwise Stated