This paper investigates whether differences in information- based trading can explain observed differences in spreads for active and infrequently traded stocks. Using a new empirical technique, we estimate the risk of information- based trading for a sample of NYSE listed stocks. We use the...

Emergence of new financial markets has led to fragmentation of order flows, leading to reduced liquidity in any particular market. Some markets are alleged to compete by focusing on quot;cream-skimmingquot; of uninformed trades, leaving informed trades to established markets. We develop a test...

Infrequently traded stocks tend to have higher bid-askspreads than frequently traded stocks. We use a new empirical technique to investigate the risk of information- based trading in active versus inactive stocks. We estimate the stochastic process of trades by maximum likelihood. Using a sample...