In recent years there has been a dramatic growth in academic interest in the predictability of asset returns based on past history. A growing number of researchers argue that time-series patterns in returns are due to investor irrationality, and thus can be translated into abnormal profits....

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...

Do order flows in index derivatives play an informational role? Weekly index put order flow on the International Securities Exchange positively and robustly predicts weekly S&P 500 index returns. This result obtains mainly for net put buying and is stronger in high VIX periods and in periods...

We study the interdependencies between transaction costs, portfolio characteristics, and mutual fund performance. Using a novel dataset of actual mutual fund trades, we find that, controlling for investment style, larger funds realize lower percentage transaction costs than smaller funds. Larger...

A firm's marketing efficiency, the ability to optimally deploy and integrate different marketing inputs to achieve high sales revenue at low cost, is persistent. High marketing efficiency predicts better future operating performance and stock returns, especially in competitive industries. A...

This article explores cross-market liquidity dynamics by estimating a vector autoregressive model for liquidity (bid-ask spread and depth, returns, volatility, and order flow in the stock and Treasury bond markets). Innovations to stock and bond market liquidity and volatility are significantly...