We find evidence consistent with previously unrecognized market manipulation by broker-dealers. Specifically, we show that pre-trade hedging, which is distinct from front-running, alters prices at which derivative trades occur. We document that this behavior is intentional by exploiting...

Recent research argues that uncertainty about future stock borrowing fees is an impediment to short-selling and it explains the risk-adjusted performance of short strategies. One possible mechanism is that borrowing fee risk carries a risk premium. Since the present value of the uncertain...

Conventional estimates of costs of taking liquidity in options markets are large. Nonetheless, options trading volume is high. We resolve this puzzle by showing that options price changes are predictable at high frequency and many traders time executions by buying (selling) when the option fair...

Trillions of dollars of derivatives are trading in many markets regularly, but little is known about the direct interactions between different types of derivatives referencing the same firm. This study is the first to examine the impact of credit derivatives on equity derivatives. We show that...

Using recent U.S. data we find that the patterns of returns around open-market share repurchases have changed compared to existing results based on earlier samples. The long-horizon abnormal returns estimated using various methodologies following repurchase announcements made after 2001 are much...

The question of whether and to what extent option trading impacts underlying stock prices has been of interest since options began exchange-based trading in 1973. Recent research presents evidence of an informational channel through which option trading impacts stock prices by showing that...

The option implied volatility spread and skew predict stock returns. These variables also reflect the expected cost of borrowing stock to sell short. The stock borrowing fee implied from options prices predicts changes in quoted borrowing fees and stock returns; however, the volatility spread...

We use brokerage account records to study trading during the Chinese put warrants bubble and find evidence consistent with extrapolative theories of speculative asset price bubbles. We identify the event that started the bubble and show that investors engaged in a form of feedback trading based...

We examine the profitability of hedge fund equity short sales. We identify opening and closing trades by combining data on funds' transactions and holdings. Short sales covered within five trading days are highly profitable, but those kept open longer are not. Some of the profitability is due to...

Financial institutions that issue commodity-linked notes hedge their liabilities by buying commodity futures. Henderson, Pearson and Wang (2015) show that these futures trades impact commodity futures prices and interpret this as evidence that uninformed financial flows into the commodity...