This paper proposes the Shannon entropy as an appropriate one-dimensional measure of behavioural trading patterns in financial markets. The concept is applied to the illustrative example of algorithmic vs. non-algorithmic trading and empirical data from Deutsche Börse's electronic cash equity...

We argue for incorporating the financial economics of market microstructure into the financial econometrics of asset return volatility estimation. In particular, we use market microstructure theory to derive the cross-correlation function between latent returns and market microstructure noise,...

We show that average excess returns during the last two years of the presidential cycle are significantly higher than during the first two years: 9.8 percent over the period 1948 2008. This pattern in returns cannot be explained by business-cycle variables capturing time-varying risk premia,...

This paper discusses the role of internal corporate ratings as a means by which commercial banks condense their informational advantage and preserve it vis-à-vis a competitive lending market. In drawing on a unique data set collected from leading universal banks in Germany, we are able to...

We selectively survey, unify and extend the literature on realized volatility of financial asset returns. Rather than focusing exclusively on characterizing the properties of realized volatility, we progress by examining economically interesting functions of realized volatility, namely realized...

We explore the macro/finance interface in the context of equity markets. In particular, using half a century of Livingston expected business conditions data we characterize directly the impact of expected business conditions on expected excess stock returns. Expected business conditions...

We selectively survey, unify and extend the literature on realized volatility of financial asset returns. Rather than focusing exclusively on characterizing the properties of realized volatility, we progress by examining economically interesting functions of realized volatility, namely realized...

We explore the macro/finance interface in the context of equity markets. In particular, using half a century of Livingston expected business conditions data we characterize directly the impact of expected business conditions on expected excess stock returns. Expected business conditions...

Central counterparties (CCPs) have increasingly become a cornerstone of financial markets infrastructure. We present a model where trades are time-critical, liquidity is limited and there is limited enforcement of trades. We show a CCP novating trades implements efficient trading behaviour. It...

This paper considers a trading game in which sequentially arriving liquidity traders either opt for a market order or for a limit order. One class of traders is considered to have an extended trading horizon, implying their impatience is linked to their trading orientation. More specifically,...