Showing 1 - 10 of 36
This paper employs contingent claims analysis to decompose the firm's systematic risk into the risk as- sociated with its assets in place and the risk arising from future growth opportunities. 5 Contingent claims analysis is well-suited to such decomposition, since a growth opportunity can be...
Persistent link: https://www.econbiz.de/10013153197
This paper examines the empirical relation among trading volume, informational variables (i.e., precision and differential beliefs), the bid-ask spread components, and price volatility using a structural model that treats the spread components, trading volume, and price volatility as endogenous....
Persistent link: https://www.econbiz.de/10012722028
This paper develops a simple formula for approximating Tobin's q. The formula requires only basic financial and accounting information. Results of a series of regressions comparing our approximate q values with those obtained via Lindenberg and Ross' (1981) more theoretically correct model...
Persistent link: https://www.econbiz.de/10012767169
In this paper we suggest that market makers deduce the extent of the adverse selection problem associated with a stock (and set up the bid-ask spread accordingly) by observing how many financial analysts are following that stock. Market makers do this based on the belief that more financial...
Persistent link: https://www.econbiz.de/10013153200
In this study we show that market uncertainty [measured by the Chicago Board Options Exchange Market Volatility Index (VIX)] exerts a large market-wide impact on liquidity, which gives rise to co-movements in individual asset liquidity. The effect of VIX on stock liquidity is greater than the...
Persistent link: https://www.econbiz.de/10010906187
We analyze the equilibrium spread when the transaction size of informed traders is elastic in the value of private information (α). We show that the pooling equilibrium is likely to be inefficient when trade size is sensitive to α and the inefficient equilibrium can occur before the market...
Persistent link: https://www.econbiz.de/10013138182
This paper explores the role of pre-opening price signals in price discovery and liquidity. NYSE Rule 48 suspends the responsibility of designated market makers for disseminating pre-opening price indications in the event of extreme market-wide volatility. Rule 48 speeds up the opening of stocks...
Persistent link: https://www.econbiz.de/10013231514
Persistent link: https://www.econbiz.de/10003813186
Using limit order books across all U.S. exchanges, we show that while liquidity for small orders (e.g., the quoted and effective spreads) decreases, liquidity for large orders (e.g., the cumulative depth and the price impact of multiple trades) improves after the implementation of the Tick Size...
Persistent link: https://www.econbiz.de/10012898683
In this study we analyze dealer exit, survival, and competitive equilibrium in the NASDAQ Stock Market using data from a unique time period that entails major changes in regulatory and competitive environments. We decompose the forces that affect dealer survival into market factors and dealer...
Persistent link: https://www.econbiz.de/10013077995