Theoretical studies show that shocks to funding constraints should affect and be affected by market illiquidity. However, little is known about the empirical magnitude of such responses because of the intrinsic endogeneity of illiquidity shocks. This paper adopts an identification technique...

Liquidity issues in financial markets arise because of two main factors: asymmetric information and cost of market participation. To alleviate these frictions, several exchanges start with a pre-opening period characterized by the accumulation of orders and the absence of trading. What is the...

Information technology, infrastructure enhancement, and arbitrage strategies all contributeto link trading venues in fragmented markets. Our paper highlights a new cross-market linking channel: the interdependence of liquidity providers' inventory costs. We use a two-venue duopoly model...