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...

We derive the theoretical result that the existence of a secondary market increases primary market liquidity in the form of lower effective spreads and higher issuance quantities. The same intuition suggests a shorter funding time. Using intraday peer-to-peer issuance data, we find that the...

This paper develops a theory of the frequency of financial analysts' forecast revisions and then tests the empirical predictions of the model. Financial analysts act as information intermediaries for firms and investors and therefore their forecast revision frequency helps explain the...

The costly trade theory predicts that it is much more difficult to exploit long-term private information than short-term. Thus, there is less long-term information impounded in prices. The managerial myopia theory predicts that a variety of short-term pressures, including inadequate information...

The left-digit effect is defined as when a change in the left-most digit of a price (e.g., 7 to 6 when $7.00 drops to $6.99) dramatically affects the perception of the magnitude. Using a random sample of more than 100 million stock transactions, we find excess buying by liquidity demanders when...