In existing models of information acquisition, all informed investors receive their information at the same time. This paper analyzes trading behavior and equilibrium information acquisition when some investors receive common private information before others. The model implies that under some...

Models of price formation in securities markets suggest that privately informed investors are a significant source of market illiquidity. Since illiquidity increases the round-trip trading cost of an investor, this implies that uninformed investors will demand higher rates of return from...

This paper investigates empirically the relation between the number of analysts following a security and the cost of transacting in the security, using intraday data for the year 1988. Using single and simultaneous equation specifications, it is found that the quoted bid-ask spreads on a large...

While trading appears to be hazardous to most individual investors' wealth, some individual investors with well-functioning informational networks may be able to turn a profit. Indeed, we find that in the Chinese stock market, wealthy investors with portfolio values above the 99.5th percentile...

We propose that the volatility of order flow is a proxy for costs of information asymmetry, as order flow volatility varies positively with parameters that also influence adverse selection costs of trading. Empirically, order flow volatility is significantly higher prior to earnings or merger...

The effectiveness of liquidity provision by HFT firms via the limit order book is an unexplored but central policy issue. Using a unique dataset consisting of limit order placement, execution, and cancellations on Nasdaq, we find that HFT firms do not cancel orders more frequently than non-HFT...

We explore the optimal timing of voluntary disclosures by firms. By delaying disclosure of a signal, firms encourage the acquisition of correlated signals by reducing informed investors' exposure to the long-term risk of holding the asset. Immediate disclosure reduces rents from acquiring the...

This paper studies the dynamics of high-frequency market efficiency measures. We provide evidence that these measures co-move across stocks and with each other, suggesting the existence of a systematic market efficiency component. In vector autoregressions, we show that shocks to funding...

Efficiency in the capital markets requires that capital flows are sufficient to arbitrage anomalies away. We examine the relationship between flows to a "quant" strategy that is based on capital market anomalies, and the subsequent performance of this strategy. When these flows are high, quant...

During the first eight months of 2015, there was an ongoing debate about whether or not Greece should remain in the euro area. Using an event study approach, we quantify the effects of Grexit-related statements made by six important euro area politicians (Merkel, Schaeuble, Tsipras, Varoufakis,...