The accurate forecast of the foreign currencies exchange rates at the ultra high frequency electronic trading in the foreign currencies exchange markets is a main topic of our research: 1) the present state of the foreign currencies exchange markets in Asia, Europe and North America; 2) the...

In a standard four factor framework, mutual fund return volatility is a reliable, persistent, and powerful predictor of future abnormal returns. However, the abnormal returns are eliminated by the addition of a “vol” anomaly factor contrasting returns on portfolios of low and high volatility...

This paper combines dimensional analysis, leverage neutrality, and a principle of market microstructure invariance to derive scaling laws expressing transaction costs functions, bid-ask spreads, bet sizes, number of bets, and other financial variables in terms of dollar trading volume and...

We derive invariance relationships in a dynamic, infinite-horizon, equilibrium model of adverse selection with risk-neutral informed traders, noise traders, market makers, and with endogenous information production. The model solution depends on two state variables: stock price and...

Using the vector autoregression (VAR) analysis, this study empirically documents the impulse response functions of financial stress and market risk premiums and performs a causality test of these two variables. The analysis of the monthly changes of the Federal Reserve Bank of St. Louis...

We conduct a volatility decomposition to identify the source of performance differences between low volatility and high volatility mutual funds. A higher level of return covariance of fund holdings is associated with more fund-level exposure to the idiosyncratic volatility effect. Average...

We develop spectral volume models to systematically estimate, explain, and exploit the high-frequency periodicity in intraday trading activities using Fourier analysis. The framework consistently recovers periodicities at specific frequencies in three steps, despite their low signal-to-noise...

We argue for incorporating the financial economics of market microstructure into the financial econometrics of asset return volatility estimation. In particular, we use market microstructure theory to derive the cross-correlation function between latent returns and market microstructure noise,...

We argue for incorporating the financial economics of market microstructure into the financial econometrics of asset return volatility estimation. In particular, we use market microstructure theory to derive the cross-correlation function between latent returns and market microstructure noise,...