Security indices are central to modern finance. Because corporate bonds trade infrequently – often less than once a month – corporate bond indices cannot rely exclusively on real time prices, and must instead estimate the value of the market portfolio. While commercial indices do this using...

We analyze how public disclosure of informed investors' trades results in manipulation, which in turn affects coordination and competition in a duopolistic setting. We show that disclosure always increases market efficiency but its effect on informed investors' profit is ambiguous. When informed...

Investors' Exchange LLC (IEX) is a newly approved public exchange that is designed to discourage aggressive high-frequency trading. We explain how IEX differs from traditional continuous double auction markets and present summary data on IEX transactions by trader class and or- der type. Our...

In a financial market where agents trade for short-term profit and where news can increase the uncertainty of the public belief, there are strategic complementarities in the acquisition of private information and, if the cost of information is sufficiently small, a continuum of equilibrium...

How do traders process and learn from market information, what trading strategies should they use, and how does learning affect the market? This paper proposes a two-sided learning model of an artificial limit order market with asymmetric information to address these issues. Using a genetic...

We show that hedge funds gain an information advantage from their prime broker banks regarding the banks' corporate borrowers. The connected hedge funds make abnormally large trades in the stocks of borrowing firms prior to loan announcements, and these trades outperform other trades. The...

We examine how professional traders behave in two financial market experiments; we contrast professional traders' behavior to that of undergraduate students, the typical experimental subject pool. In our first experiment, both sets of participants trade an asset over multiple periods after...

Large orders, particularly from institutions, are quite common these days and hence there is interest to know if institutional trading has any bearing on the price effect associated with large trades. Recent empirical studies contradict earlier evidence of negative price effect on selling large...

Recent empirical evidence suggests that financial networks exhibit a core periphery network structure. This paper aims at giving an economic explanation for the emergence of such a structure using network formation theory. Focusing on intermediation benefits, we find that a core periphery...