This paper investigates relations between several measures of trade execution costs and price rounding practices for sets of NYSE and Nasdaq listed firms. Percentage execution costs on each exchange are found to be positively related to the rounding of transaction prices and quotes, both in the...

This study assesses the sensitivity of trading cost estimates to two methodological issues: the time adjustment made before comparing trades to quotes, and the procedure used to designate trades as buyer or seller-initiated. Consistent with recent research for Nasdaq stocks, the results indicate...

Quoted and effective bid-ask spreads on Nasdaq are two to four cents per share narrower, ceteris paribus, when stocks trade with a smaller tick size below $10 per share. There is no evidence of a reduction in liquidity with the smaller tick size. The largest spread reductions occur for stocks...

We examine the Paris Bourse, whose electronic limit order market closely resembles the downstairs markets envisioned by theorists, to test several theoretical predictions regarding upstairs trading. We present direct evidence in support of the Grossman (1992) prediction that upstairs brokers...

Electricity cannot be economically stored, leading to volatile spot prices and implying that standard cost-of-carry relations are not useful for pricing electricity forward contracts. We model spot and forward power markets, evaluating the demand for risk reduction and assessing equilibrium spot...

We examine the Paris Bourse, whose electronic limit order market closely resembles the downstairs markets envisioned by theorists, to test several theoretical predictions regarding upstairs trading. We present direct evidence in support of the Grossman (1992) prediction that upstairs brokers...

Many stock exchanges choose to reduce market transparency by allowing traders to hide some or all of their order size. We study costs and benefits of hidden order usage for a sample of Euronext-Paris stocks, where hidden orders represent 44% of sample order volume. All else equal, hidden orders...

Microstructure noise in security prices biases the results of empirical asset pricing specifications, particularly when security-level explanatory variables are cross-sectionally correlated with the amount of noise. We focus on tests of whether measures of illiquidity, which are likely to be...

Alpha depends on return measurement horizon, both theoretically and empirically. We demonstrate how alphas depend on horizon, introduce a procedure to estimate long-return-horizon alphas from short-horizon returns, and find that among those mutual funds with positive alphas estimated from...

Should we be surprised at the number of “animals” in the “Factor Zoo"? The ability of the CAPM as well as workhorse three- to six-factor models to explain the cross-section of returns varies substantially over time, providing scope for a broad set of factors. We study 205...