This paper studies whether incorporating business cycle predictors is beneficial to a real time optimizing investor who must allocate funds across 3123 NYSE-AMEX stocks and the risk-free asset over the 1972-2003 period. Realized returns are positive when adjusted by the Fama-French and momentum...

This paper derives and implements a framework in which to test whether conditional asset pricing models, applied to single securities, can explain the size, value, turnover, and momentum effects in expected stock returns. In this framework individual stock betas vary with firm level size and...

Daily returns for stocks listed on the New York Exchange (NYSE) are not serially dependent. In contrast, order imbalances on the same stocks are highly persistent from day to day. These two empirical facts can be reconciled if sophisticated investors react to order imbalances within the trading...

We study the joint time-series of daily liquidity in government bond and stock markets over the period 1991 to 1998. Innovations in liquidity are positively and significantly correlated across stock and bond markets. Further, order imbalances in the stock market impact bond and stock liquidity,...

In this paper, we focus on a previously unexplored but an intuitive measure of trading activity: the aggregate daily order imbalance, buy orders less sell orders, on the NYSE. Order imbalance increases following market declines and vice versa, which reveals that investors are contrarians on...

This paper studies the relation between order imbalances and daily returns of individual stocks. Our tests are motivated by a theoretical framework, whose distinguishing feature is that it explicitly considers how market makers with inventory concerns dynamically accommodate autocorrelated...

The market micro-structure literature has typically focussed on single assets. Prior to this paper there has been virtually no empirical work on the common determinants of liquidity. This paper documents that quoted spreads, quoted depth and effective spreads co-move with market-wide and...

This paper finds that trading volume is a significant determinant of the lead-lag patterns observed in stock returns. Daily and weekly returns on high volume portfolios lead returns on low volume portfolios, controlling for firm size. Nonsynchronous trading or low volume portfolio...

This paper analyzes the effects of a finite tick size and the practice of 'payment-for-order-flow' on competition between NYSE and non-NYSE market makers. Due to the presence of non-specialist market makers, order submitters find that their NYSE orders are sometimes executed at better than...

This paper shows that distressed stocks and bonds are overpriced during high sentiment periods. The correction of overpricing leads to a range of anomalous cross-sectional patterns in stock and bond returns. Including bonds as additional test assets allows us to develop testable restrictions...