In Trading & Exchanges: Market Microstructure for Practitioners, SEC Chief Economist Larry Harris has written a must-read for anyone interested in the good, the bad, and the ugly of securities trading.

Trading volume and open interest in options and futures contracts on stock indices, equities, and interest rate instruments traded on world exchanges have experienced remarkable growth. However, this growth has been accompanied by controversy about the proper role of financial derivatives and...

During the recent flat tax debate, interest rates on long-term municipal bonds rose relative to the rate on U.S. Treasury bonds. This was widely attributed to expectations of a reduction in future tax rates. While an axiom of finance states that current asset prices reflect expectations about...

This article assesses the current state of the efficient market hypothesis, which was the conventional wisdom among academic economists in the 1970s and most of the 1980s. It concludes that empirical evidence provides an overwhelming case against the efficient market hypothesis. The evidence...

In 1973, Myron Scholes and the late Fischer Black published their seminal paper on option pricing. The Black-Scholes model revolutionized financial economics in several ways: It contributed to our understanding of a wide range of contracts with option-like features, and it allowed us to revise...

Margin loans have long been associated in the popular mind with instability in security markets, and the potential for margin lending to exacerbate the amplitude of cycles in stock prices has received considerable attention in the years since the Crash of 1929. Despite the many empirical studies...

The distribution of returns on common stocks is, arguably, one of the most widely studied financial market characteristics. The performance of stock prices during breaks in trading has received considerable attention in recent years, especially since the advent of "circuit breakers" designed to...

Why does Congress allow municipal interest payments to be exempted from federal income taxes in the face of a very large chronic deficit in the federal budget, even though no constitutional provision requires that this tax policy continue? The rhetoric of tax exemption is philosophical,...

Mutual funds played a very small role in the financial system until the 1970s, before which ownership of financial instruments was dominated by commercial banks, thrift institutions, insurance companies, and pension funds. The financial system of the 1990s is not simply the system of the 1970s...