-ask spreads and depth), returns, volatility, and order flow in the stock and bond markets. We find that a shock to quoted spreads … in one market affects the spreads in both markets, and that return volatility is an important driver of liquidity …. Innovations to stock and bond market liquidity and volatility prove to be significantly correlated, suggesting that common factors …

estimated in these series and the implied model is similar to a time-varying parameter model with stochastic volatility …

Does the presence of arbitrageurs decrease equilibrium asset price volatility? I study an economy with arbitrageurs … effect). In equilibrium, the presence of arbitrageurs increases volatility when the inference effect dominates the arbitrage …