This paper finds that the majority of stock price movements remain unexplained after controlling for both public and private information. This suggests that economists' inability to explain asset price movements is the result of either noise or naive asset pricing models.

The empirical literature suggests that the limit order book contains information that might be used by the specialist to his own advantage. I develop a model where there is a strategic specialist who competes against a limit order book and has information about supply. The presence of a...