I develop a theory of optimal trading by an institutional trader who receives a parent order (i.e., an overall trading request) from a fund manager to buy a specific quantity of a particular stock over a specified time horizon. The trader selects child orders to be submitted each period over the...

This paper examines intraday price discovery in three closely-related U.S. markets: stocks, Over-The-Counter (OTC) corporate bonds, and New York Stock Exchange (NYSE) electronically-traded corporate bonds. We calculate the Hasbrouck (1995) information shares of these three markets over five...

We investigate how the increase in speed of U.S. equity markets has distorted liquidity measures. We find that the widely-used Monthly Trade and Quote (MTAQ) database yields a percent effective spread 43% higher than our benchmark, a quoted spread that is nonpositive nine times more often, and a...

U.S. equity markets have explosively increased their trade and quote frequency and the decline of the dominance of the NYSE has increased the importance of National Best Bid and Offer (NBBO) quotes. We address three methodology issues that arise in the computation of the NBBO: (1) millisecond...

We analyze variations of three risk determinants of the Extended Merton structural corporate bond model. We consider three alternative non-Gaussian distributions, varying recovery rates, and the possibility of early default or default at maturity. We test a sample of 79 corporate bonds from 1987...