We examine the effect of information asymmetry on equity prices in the local A- and foreign B-share market in China. We construct measures of information asymmetry based on market microstructure models, and find that they explain a significant portion of cross-sectional variation in B-share...

Macro announcements change the equilibrium risk-free rate. We find that Treasury prices reflect part of the impact instantaneously, but intermediaries rely on their customer order flow after the announcement to discover the full impact. This customer flow informativeness is strongest when...

Regulators and some large investors have recently raised concerns about temporary or transitory volatility in highly automated financial markets. It is far from clear that high-frequency trading, fragmentation, and automation are contributing to transitory volatility, but some institutions...

A breakdown of cross-market arbitrage activity makes markets more fragile, and could result in price crashes. We provide supportive evidence for this novel channel based on a high-frequency analysis of the most salient crash in recent history: The Flash Crash. We further show that such event can...

The arrival of high-frequency traders (HFTs) coincided with the entry of new markets and, subsequently, strong fragmentation of the order flow. These trends might be related as new markets serve HFTs who seek low fees and high speed. New markets only thrive on competitive price quotes which...

I review the recent high-frequency trader (HFT) literature to single out the economic channels by which HFTs affect market quality. I first group the various theoretical studies according to common denominators and discuss the economic costs and benefits they identify. For each group, I then...

I review the recent high-frequency trader (HFT) literature to single out the economic channels by which HFTs affect market quality. I first group the various theoretical studies according to common denominators and discuss the economic costs and benefits they identify. I then, for each group,...

How does information get revealed in decentralized markets? We test several hypotheses inspired by recent dealer-network theory. To do so we construct an empirical map of information revelation where two dealers are connected based on the synchronicity of their quote changes. The tests, based on...

We provide evidence of the effects of introducing a central clearing counterparty (CCP) on price stability by adopting as an experimental construct the 2009 clearing reform in three Nordic equity markets. We find that the daily price volatility of the affected equities experience an economically...