This paper examines market liquidity in the post-crisis era in light of concerns that regulatory changes might have reduced dealers' ability and willingness to make markets. We begin with a discussion of the broader trading environment, including an overview of regulations and their potential...

Do regulations decrease dealer ability to intermediate trades? Using a unique data set of dealer-bond-level transactions, we link changes in liquidity of individual U.S. corporate bonds to dealers’ transaction activity and balance sheet constraints. We show that, prior to the financial crisis,...

The share of market making conducted by high-frequency trading (HFT) firms has been rising steadily. A distinguishing feature of HFTs is that they trade intraday, ending the day flat. To shed light on the economics of HFTs, and in a departure from existing market-making theories, we model an HFT...

We document a highly significant, strongly nonlinear dependence of stock and bond returns on past equity-market volatility as measured by the VIX. We propose a new estimator for the shape of the nonlinear forecasting relationship that exploits additional variation in the cross section of...

We construct risks around consensus forecasts of real GDP growth, unemployment, and inflation. We find that risks are time-varying, asymmetric, and partly predictable. Tight financial conditions forecast downside growth risk, upside unemployment risk, and increased uncertainty around the...