The goal of this paper is to study how informational frictions affect asset liquidity in OTC markets in a laboratory setting. The experiments replicate an OTC market similar to the one used in monetary and financial economics (Shi, 1995; Trejos and Wright, 1995; Duffie, Garleanu, and Pedersen, 2005):...

We present comprehensive evidence in support of giving liquidity equal standing to size, value/growth, and momentum as investment styles, as defined by Sharpe (1992). First, we show that financial market liquidity, as identified by stock turnover, is an economically significant indicator of...

We propose an information-based theory to explain time variation in liquidity and link it to a variety of patterns in asset markets. In "normal times," the market is fully liquid and gains from trade are realized immediately. However, the equilibrium also involves periods during which liquidity...

Retail investors pay over twice as much attention to local companies than non-local ones, based on Google searches. News volume and volatility amplify this attention gap. Attention appears causally related to perceived proximity: first, acquisition by a nonlocal company is associated with less...

UK government bond yields rise significantly in a two-day window before Monetary Policy Committee (MPC) meetings, with the majority of this yield drift attributed to increases in risk premia. These effects concentrate in pre-MPC windows that coincide with issuance of UK government bonds....

In this paper we survey the theoretical and empirical literatures on market liquidity. We organize both literatures around three basic questions: (a) how to measure illiquidity, (b) how illiquidity relates to underlying market imperfections and other asset characteristics, and (c) how...

This study tests whether disclosing a trader's identity dampens or stimulates subsequent trading volume based on the trader's reputation for being informed. While a reputation for being informed makes markets less liquid, thus inhibiting subsequent trade ("illiquidity effect"), the information...

The goal of this paper is to study how informational frictions affect asset liquidity in OTC markets in a laboratory setting. The experiments replicate an OTC market similar to the one used in monetary and financial economics (Shi, 1995; Trejos and Wright, 1995; Duffie, Garleanu, and Pedersen, 2005):...

How can fire sales for financial assets happen when the economy contains well capitalized, but non-specialist investors? Our explanation combines rational expectations equilibrium and "lemons" models. When specialist (informed) market participants are liquidity-constrained, prices become less...

Using detailed micro data at the ZIP code level, this article explores the regional variation in housing market performance to account for the severity of the Great Recession. The granularity of the data, relative to a more traditional analysis at the county level, is useful for evaluating the...