Using a new dataset consisting of six years of real-time exchange rate quotations, macroeconomicexpectations, and macroeconomic realizations (announcements), we characterize the conditional means of U.S. dollar spot exchange rates versus German Mark, British Pound, Japanese Yen, Swiss Franc, and...

We study the determinants of liquidity and price differentials between on-the-run and off-the-run U.S. Treasury bond markets. To guide our analysis, we develop a parsimonious model of multi-asset speculative trading in which endowment shocks separate the on-the-run security from an otherwise...

Electronic version of an article published as Review of Pacific Basin Financial Markets and Policies, Volume 10, Issue 4, 2007, pp. 519-540, Article DOI: 10.1142/S0219091507001185 Copyright World Scientific Publishing Company www.worldscinet.com/rpbfmp

In recent years a substantial amount of literature in one way or another deals with liquidity. The interest in it grows beyond the walls of the academia, as the security exchanges recognize the importance of the concept and plan to adopt unique measures of liquidity and publish them in the...

This paper compares the true, ex-ante forecasting performance of a micro-based model against both a standard macro model and a random walk. In contrast to existing literature, which is focused on longer horizon forecasting, we examine forecasting over horizons from one day to one month (the...

Drawing on the theoretical and empirical evidence that private information risk is priced in the expected returns of equities, we hypothesize that information risk premium is an important component of the risk premium that leads to the violation of uncovered interest rate parity (UIRP). Using an...

In the first essay, we provide new evidence on the relationship between order flow and prices, an issue that is central to asset pricing and market microstructure. We examine proprietary data on a broad panel of NYSE-listed stocks that reveal daily order imbalances by institutions, individuals,...