2023-05-11 | Andrés Chiriboga defends his PhD

This afternoon, Andrés Chiriboga, my PhD student, will defend his PhD  in Sciences Po: The Ecuadorian Securities Market: a sociological account of an apparent failure.
https://www.sciencespo.fr/ecole-doctorale/fr/content/avis-de-soutenance-de-these.html

It means a lot to me, as it is my first PhD student to defend. Years ago, I studied with Alexandra Louvet the time needed in France for a PhD student to have her/his first PhD Student defend his/her PhD. I did it in 18.5 years… This is not a good score :( … (but at least it was in two different institutions).
https://laviedesidees.fr/Academic-Inbreeding-An-Evaluation
https://www.cairn.info/revue-sociologie-2010-1-page-3.htm

I’m also very proud because it is an excellent PhD, which enables to understand better how financial markets may sometimes work. Two incredible features. Andrés collected ALL the transactions at the Ecuadorian Stock exchange during 11 years !!! Second amazement, the CSV file is only 42 Mb !!!

In fact, the Ecuadorian stock market never took off, even when you compare it to that of other Latin American countries.

Andrés shows that on this market, actors resort to preferential trading with a limited set of actors. They first try to internalize transactions within their set of regular clients. If they can’t find a counterpart among them, they look out for brokers with whom they have repeated transactions, and they prefer brokers from the same city (Guayaquil vs Quito).

Brokers don’t play the market and this has clear consequences on the trading volume. The more trades are repeated, reciprocated, within the same domicile, the lower the monthly trading volume. (But this is not the case for internalized trades).

Is this market a failure ? Yes, according to the neoliberal agenda of promoting active, liquid and deep market (and disregarding the downsides of too liquid markets). But not necessarily if you adopt a Keynesian view, where investors should stick to their long term investments.

But, it’s also a very closed, traditional market, the “monopoly of the Rich” (Weber), not very different from our former agents de change.     
There’s a lot more to discover in Andrés’ PhD. Congratulations !