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,...

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...

Recent literature documents that analyst recommendations tend to coincide with important corporate events, but offers mixed evidence on whether such recommendations have added value. In this paper, we use jump in stock price as a proxy for generic corporate “information event” and examine...

We document the intradaily patterns of return volatility and trading activity in trade times of fixed dollar volumes --- shorter trade times reflect higher trading activity. Unlike the U-shaped intraday seasonality in calendar-time volatility, trade-time volatility plunges by 40-60% over the...

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...

The main objective of this study is to examine if the long term financial trends influence not only a stock market's returns, but also the day of the week pattern (DOW). In order to examine the specific issue we try to find a financial market which: (i) presents clear and long-term financial...

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...

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...

Fragmentation has fostered competition among trading venues. While some platforms rely on a preopening phase leading to an opening call auction, some others start the day without such mechanisms. Using a unique dataset of stocks cross-traded on Euronext (which features a pre-open mechanism) and...