Impact of Capital Market Events on Market Efficiency

I use eight objective and systematic measures of the efficiency of the market for a stock. Based on the market microstructure models of Kyle and Obizhaeva (2016) and Bhattacharya (2019), I develop a six-equation (five- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (Kyle-Obizhaeva liquidity measure, short interest, number of analysts, institutional holdings, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I apply Three Stage Least Squares and Errors in Variables to estimate the structural system, using panel-based instrumentation strategies for endogenous and inaccurately measured variables. Analyzing Nasdaq and non-Nasdaq stocks separately, I find that market efficiency improved significantly a) following Dot-Com Bubble, Reg FD, SOx, and Global Analyst Research Settlements, and then, b) after the GFC and Dodd-Frank