The literature has used small samples to show that fast trading or low latency trading (LLT) improves efficiency at extremely high frequencies. However, it is not clear whether LLT driven high frequency improvements in efficiency can impact corporate decision making and investor risk sharing or...

We propose that the volatility of order flow is a proxy for costs of information asymmetry, as order flow volatility varies positively with parameters that also influence adverse selection costs of trading. Empirically, order flow volatility is significantly higher prior to earnings or merger...

Building on the growing literature on inter-firm links and limited attention, we find evidence of return predictability across alliance partners. A long-short portfolio sorted on lagged returns of strategic alliance partners provides a return of 89 basis points per month that is robust to a...

This paper uses the volatility surface data from options contracts to document a strong, robust, and positive cross-sectional relation between risk-neutral skewness (RNS) and subsequent stock returns. The differential return between high and low RNS stocks amounts to 0.17% per week....

Prices of the highly liquid S&P500 exchange traded fund (SPY) and the E-mini future (ES) respond to macroeconomic announcement surprises within five milliseconds, with trading intensity increasing over a hundred-fold following the news release. However, profits from trading quickly are...

A manager who wants to be viewed favorably has an incentive to advance or delay the arrival of information about his firm's profitability. In the model, a high ability manager tries to advance resolution of a likely-favorable outcome, while a low ability manager may defer resolution. Such...

Given the evidence that the level of liquidity affects asset returns, a reasonable hypothesis is that the second moment of liquidity should be positively related to asset returns, provided agents care about the risk associated with fluctuations in liquidity. Motivated by this observation, we...

Stocks and other financial assets are traded at prices that lie on a fixed grid determined by the minimum tick size permitted in the market. Consequently, observed prices and quoted spreads do not correspond to the equilibrium prices and true spreads that would exist in a market with no minimum...

In theoretical models, liquidity and order flow volatility are determined by the same exogenous parameters. Thus, the variability of order flow can at least partially proxy for the unobserved (true) liquidity. Levels of and shocks to order flow volatility are indeed positively and significantly...

The distress anomaly reflects the abnormally low returns of high credit risk stocks during financial distress. Evidence from stocks and corporate bonds reinforces the anomaly and challenges rationales based on shareholders' ability to extract value from bondholders, time-varying betas,...