This paper studies the effects of investors’ heterogeneous beliefs on the trading volume,price volatility, and liquidity of stocks. Following Kurz and Motolese (2008), wepropose a simple theoretical model to show that the equilibrium stock price is linearlyand positively correlated with market...

We investigate the effects of return jumps on option bid-ask spreads measured in implied volatility. To explain bid-ask spread quoting behavior, we construct a general model with market makers trading in an incomplete market in which a Bernoulli-type jump could occur. Following a numerical...

This paper examines the role of high-frequency traders in flash episodes in electronic financial markets. To do so, we construct an agent-based model of a market for a financial asset in which trading occurs through a central limit order book. The model consists of heterogeneous agents with...

This study investigates the association between stock liquidity and the H-share discount using a sample of Chinese cross-listed stocks in A- and H-shares markets. We examine the liquidity hypothesis by employing depth and trading activity variables. Our results suggest that stocks with a higher...

This paper studies the effects of investors' heterogeneous beliefs on the trading volume, price volatility, and liquidity of assets. Following Kurz and Motolese (2008), we propose a theoretical model to show that the equilibrium asset price is linearly and positively correlated with market...

We study how the risks to future liquidity flow across corporate bond, Treasury, and stock markets. We document distribution “flight-to-safety” effects: a deterioration in the liquidity of high-yield corporate bonds forecasts an increase in the average liquidity of Treasury securities and a...

This paper provides a comprehensive economic evaluation of the short-horizon predictive ability of liquidity on monthly stock returns, using dynamic asset allocation strategies. We assess the economic value of the out-of-sample power of empirical models based on different liquidity measures and...

We examine aggregate analyst forecast errors (AAFE) and find a systematic component, which is predictable using lagged stock market returns and macroeconomic variables. The evidence suggests that analysts do not fully take into account macroeconomic influences on individual firms' earnings in...

We study the conditional distribution of future liquidity in the secondary market for corporate bonds as a function of current liquidity. Increases in liquidity are persistent for investment-grade bonds and flighty for high-yield bonds. Greater liquidity of high-yield bonds is associated with...