We exploit an exogenous shock to dark trading volume to identify the causal effect of changes in dark trading volume on market quality. Following a 34% reduction in dark trading, the cost of trade (e.g. effective spreads, realized spreads, price impact, and quoted spreads) remain unchanged. We...

We explore business cycle variation in the relation between short interest and future stock returns. During economic expansions, firm-level short interest is a strong negative predictor of the cross-section of stock returns. In contrast, during recessions, short interest aggregated across firms...

I propose and test a simple model of the equity premium implied by the prices of options on the stock market. The model's main assumption is the absence of arbitrage in stock and option markets. Its forecasts of the equity premium are more accurate than those in prior work, especially when...