We propose an exchange rate model which is a hybrid of the conventional specification with monetary fundamentals and the Evans-Lyons microstructure approach. It argues that the failure of the monetary model is principally due to private preference shocks which render the demand for money...

We show evidence of a liquidity searching behaviour of informed investors in option listings, which was also found by Collin-Dufresne and Fos (2015) using stock markets. Nevertheless, and differently from Collin-Dufresne and Fos (2015), we find that the option bid-ask spread may be still a good...

We examine the effects of investor disagreement on price discovery using a recurring public information event in the highly liquid crude oil futures market, a market free of short-sale constraints. We show that prices reflect positive news within one-half second of trading, but continue to drift...

I develop a macroeconomic model of information production in financial markets during asset price booms and busts. Agents acquire information to decide which firms to fund. In the aggregate, more precise information leads to less capital misallocation. The source of booms and busts determines...