Purchased order flow refers to the practice of dealers or trading locales paying brokers for retail order flow. It is alleged that such agreements are used to 'cream skim' uninformed liquidity trades, leaving the information-based trades to established markets. We develop a test of this...

We investigate the role of information in affecting a firm's cost of capital. We show that differences in the composition of information between public and private information affect the cost of capital, with investors demanding a higher return to hold stocks with greater private information....

This paper examines the effects of price-contingent orders on security prices. The authors show that a market maker who knows the type and composition of trades will set larger spreads and adjust prices faster than if price-contingent orders were not allowed. Because traders have rational...

This paper delineates the link between the existence of information, the timing of trades, and the stochastic process of prices. The authors show that time affects prices, with the time between trades affecting spreads. Because the absence of trades is correlated with volume, the authors' model...

We investigate the role of information-based trading in affecting asset returns. We show in a rational expectation example how private information affects equilibrium asset returns. Using a market microstructure model, we derive a measure of the probability of information-based trading, and we...

The authors investigate the informational role of volume and its applicability for technical analysis. They develop a new equilibrium model in which aggregate supply is fixed and traders receive signals with differing quality. The authors show that volume provides information on information...

This paper investigates the informational role of transactions volume in options markets. We develop an asymmetric information model in which informed traders may trade in option or equity markets. We show conditions under which informed traders trade options, and we investigate the implications...

A goal for stock exchanges is to increase participation by firms and investors. We show how specific features of the microstructure can reduce perceived ambiguity, and induce participation by both investors and issuers. We develop a model with sophisticated traders, who we view as expected...