This article analyzes the manifold situations in which the efficient-market hypothesis (EMH) has influenced—or has failed to influence—federal securities regulation and state corporate law, and the prospective roles for the EMH in these contexts. In federal securities regulation, the EMH has...

Using a portfolio of Dow Jones Industrial Average index constituents and the index ETF, we document significant intraday deviations from the law of one price. These are especially pronounced at very short time intervals. The extent of deviations is related to volatility, liquidity, and...

In a market with short term agents and heterogeneous information, when liquidity trading displays persistence, prices reflect average expectations about fundamentals and liquidity trading. Informed investors exploit a private learning channel to infer the demand of liquidity traders from the...

This paper analyzes whether the application of a “circuit breaker” to a financial market (i.e. a mechanism that interrupts trading for a predetermined period when the price moves beyond a predetermined level) reaches its intended goals of increased market stability and overall welfare. Our...

We analyze commonality in informed trading across stocks, and how informed trading varies with the structural and trading characteristics of a firm. We thereby isolate the residual level of informed trading that is unrelated to commonality, trading characteristics, and structural...

We propose a measure of dispersion in fund managers׳ beliefs about future stock returns based on their active holdings, i.e., deviations from benchmarks. We find that both the level of and the change in dispersion positively predict subsequent stock returns on a risk-adjusted basis. This effect...

Andersen and Bondarenko's paper “VPIN and the Flash Crash” is essentially a comment on our 2011 Journal of Portfolio Management paper using our measure of order toxicity, VPIN. Andersen and Bondarenko dispute our empirical findings and argue that VPIN essentially does not work. This is...

Two important characteristics of current European equity markets are rooted in changes in financial regulation (the Markets in Financial Instruments Directive). The regulation (i) allows new trading venues to emerge, generating a fragmented market place and (ii) allows for a substantial fraction...

Financial markets are increasingly fragmented. How to supply liquidity in this environment? Using an inventory model, we analyze how two strategic intermediaries compete across two venues that can be hit simultaneously by liquidity shocks of equal or opposite signs. Although order flow is...

This discussion paper resulted in a publication in the 'Journal of Banking and Finance', 2014, 38, 89-105.<P> This paper documents that speed is crucially important for high frequency trading strategies based on U.S. macroeconomic news releases. Using order level data of the highly liquid S&P500...</p>