The continuous debate and research related to High Frequency Trading emphasises the importance of performing analysis on topics associated with the interaction of traders with different trading speeds, and the effects of this interaction on price efficiency and market quality. The aim of this...

We investigate the impacts of the short-termism on multiple equilibria in a dynamic rational expectations equilibrium model. We find that short-termism is not the cause of equilibrium multiplicity but affects market quality of all equilibria. The liquidity, price efficiency and expected trading...

In finance, decision making and choice requires that we assume that asset prices tend to trend. This assumption also logically enables us to construct exits to limit losses and protect capital. But investors have good reason to be uneasy regarding the potential for significant loss when using a...

This paper shows that in asset pricing the information environment gives rise to a systematic risk factor when the informativeness of future news events varies with their content (i.e., bad news and good news are not equally informative). The paper further shows that in such cases (cross) serial...

We present comprehensive evidence in support of giving liquidity equal standing to size, value/growth, and momentum as investment styles, as defined by Sharpe (1992). First, we show that financial market liquidity, as identified by stock turnover, is an economically significant indicator of...

The efficient market hypothesis, in its current form, dates academically from 1970 and it was first accepted by a Federal Court in a shareholder class action in 1975, providing plaintiffs with a rebuttable presumption of reliance based on the fraud-on-the-market theory. By 1988, the...

This paper surveys some economic principles required to understand the characteristics and effects of flash orders and trading. We present the benefits and current controversies surrounding flash orders. Finally, we offer recommendations that would be of interest to policymakers

During the past forty years, the simultaneous, symbiotic growth of financial innovation, disintermediation and deregulation has created an environment with extremely complex, opaque investment instruments. That system has now collapsed. At the very center of the crisis are a small group of...

We model financial innovations such as Exchange-Traded Funds, smart beta products, and many index-based vehicles as composite securities that facilitate trading common factors in assets' liquidation values. Through accessing a larger basket of assets in endogenously-chosen proportions, composite...