We analyse the effect of concealing limit order traders’ identities on market liquidity. We develop a model in which limit order traders have asymmetric information on the cost of limit order trading (which is determined by the exposure to informed trading). A thin limit order book signals to...

This Paper studies predatory trading: trading that induces and/or exploits other investors’ need to reduce their positions. We show that if one trader needs to sell, others also sell and subsequently buy back the asset. This leads to price overshooting and a reduced liquidation value for the...

We examine the risk-return characteristics of a rolling portfolio investment strategy where more than six thousand Nasdaq initial public offering (IPO) stocks are bought and held for up to five years. The average long-run portfolio return is low, but IPO stocks appear as ‘longshots’, as...

We develop a dynamic model of an order-driven market populated by discretionary liquidity traders. These traders must trade, yet can choose the type of order and are fully strategic in their decision. Traders differ in their impatience: less patient traders demand liquidity, more patient traders...

This paper examines the role of credit rating agencies in the subprime crisis that triggered the 2007-08 financial turmoil. The focus of the paper is on two aspects of ratings that contributed to the boom and bust of the market for asset-backed securities: rating inflation and coarse information...

We present a model in which issuers of asset backed securities choose to release coarse information to enhance the liquidity of their primary market, at the cost of reducing secondary market liquidity or even causing it to freeze. The degree of transparency is inefficiently low if the social...

Theoretical asset pricing models routinely assume that investors have heterogeneous information. We provide direct evidence of the importance of information asymmetry for asset prices and investor demands using plausibly exogenous variation in the supply of information caused by the closure or...

Dealers in over-the-counter securities form networks to mitigate search frictions. The audit trail for municipal bonds shows the dealer network has a core-periphery structure. Central dealers are more efficient at matching buyers and sellers than peripheral dealers, which shortens intermediation...

Two important characteristics of current equity markets are the large number of trading venues with publicly displayed order books and the substantial fraction of trading that takes place in the dark, outside such visible order books. This paper evaluates the impact of dark trading and...