We study sovereign yield dynamics and order flow in the largest euro-area treasury markets. We exploit unique transaction data to explain daily yield changes in the ten­year government bands of Italy, France, Belgium, and Germany. We use a state space model to decompose these changes into (i) a...

In the microstructure literature, information asymmetry is an important determinant of market liquidity. The classic setting is that uninformed dedicated liquidity suppliers charge price concessions when incoming market orders are likely to be informationally motivated. In limit order book (LOB)...

This paper uses the perfect market segmentation setting in China’s stock market to examine whether foreign investors are at informational disadvantage relative to domestic investors. We analyze the price discovery roles of the A- (domestic investors) and B-share (foreign investors) markets in...

This paper links the recent fragmentation in equity trading to high frequency traders (HFTs). It shows how the success of a new market, Chi-X, critically depended on the participation of a large HFT who acts as a modern market-maker. The HFT, in turn, benefits from low fees in the entrant...

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...

We study price pressures, i.e., deviations from the efficient price due to risk-averse intermediaries supplying liquidity to asynchronously arriving investors. Empirically, New York Stock Exchange intermediary data reveals economically large price pressures, 0.49% on average with a half life of...

Securities are increasingly traded through multiple venues. Chowdhry and Nanda (1991) show that sophisticated investors benefit by splitting orders across markets at the cast of local investors who only trade through one venue. If trading hours do not perfectly overlap, we can test for...

Fragmented trading is widespread. Chowdhry and Nanda [Chowdhry, B., Nanda, V., 1991. Multimarket trading and market liquidity. Rev. Finan. Stud. 4, 483-511] show that some traders benefit by splitting orders across markets at the cost of small liquidity traders who, for exogenous reasons, only...

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 that...