Daily returns for stocks listed on the New York Exchange (NYSE) are not serially dependent. In contrast, order imbalances on the same stocks are highly persistent from day to day. These two empirical facts can be reconciled if sophisticated investors react to order imbalances within the trading...

Traditionally, volume has provided the link between trading activity and returns. We focus on a hitherto unexplored but intuitive measure of trading activity: the aggregate daily order imbalance on the New York Stock Exchange. Signed order imbalances increase (decrease) following market declines...

In this paper, we analyze cross-sectional heterogeneity in the time-series variation of liquidity in equity markets. Our analysis uses a broad time-series and cross-section of liquidity data. We find that average daily changes in liquidity exhibit significant heterogeneity in the cross-section;...

This paper studies the relation between order imbalances and daily returns of individual stocks. Our tests are motivated by a model which explicitly considers how market makers dynamically accommodate autocorrelated imbalances emanating from large traders who optimally choose to split their...

We study the joint time-series of daily liquidity in government bond and stock markets over the period 1991 to 1998. Innovations in liquidity are positively and significantly correlated across stock and bond markets. Further, order imbalances in the stock market impact bond and stock liquidity,...

This paper explores liquidity spillovers in market-capitalization based portfolios of NYSE stocks. Return, volatility, and liquidity dynamics across the small and large cap sector are modeled by way of a vector autoregression model, using data that spans more than 3000 trading days. We find that...

Data from the Taiwan Stock Exchange identify the originator of each submitted order. We study order imbalances categorized by trade size and by investor type, (individuals, domestic institutions, foreign institutions.) Aggregate order imbalances for a given stock are positively autocorrelated...

Data from the Taiwan Stock Exchange identify the originator of each submitted order, and there are no designated dealers or specialists. We study marketable order imbalances, i.e., the net order flow resulting from trades that demand immediacy. We distinguish imbalances by trader type...

Since arbitrage involves trading, it is potentially impeded by market frictions and costs. We study whether stock market liquidity is related to the efficacy of arbitrage. Specifically, we examine the joint time-series of the NYSE Composite index futures basis and aggregate liquidity on the NYSE...

A manager who is concerned with outsider’s perceptions of himself or his firm will be sensitive to the timing of resolution of uncertainty about the firm’s projects. While a high ability manger tries to advance resolution of a likely-favorable outcome, a low manager may defer...