This paper proposes and conducts direct tests of the mixture of distributions model for stock prices. By exploiting the model's bivariate conditional normality of price changes and trading volume, these restrictions can be tested under very weak assumptions regarding the daily flow of...

This paper addresses the problem of testing financial models in the presence of market micro structure effects. The moment restrictions implied by the financial and market microstructure models are jointly tested using Hansen's (1982) GMM approach. To illustrate the methodology, I consider the...