We propose a model of “disposition extrapolators”—investors subject to both extrapolative beliefs and the disposition effect—to explain the sharp rise in prices and volume observed in historical financial bubbles. The model generates a novel mechanism for volume, and we test its...

Toxic arbitrage opportunities are caused by information arriving in one market leading to short lived price deviations between markets. This paper shows that the direction of such arbitrage opportunities provides valuable insights into price discovery and markets' information shares. Starting...

Rational bubbles in stocks can cause increases in trading volume, even after accounting for their expansionary effect on output and consumption. Trading volume increases are not caused by speculation driven by differences in beliefs. Dividend-bearing assets used to transfer resources...

This paper investigates the joint determination of two dimensions of a security: trading volume and return. In much of the existing literature, volume is modeled as being exogenously related to security returns. Our analysis evaluates the extent to which trading activity also depends on security...

An accurate forecast of intraday volume is a key aspect of algorithmic trading. This manuscript proposes a state-space model to forecast intraday trading volume via the Kalman filter and derives closed-form expectation-maximization (EM) solutions for model calibration. The model is extended to...

The extended trading close (ETC) provides institutional investors an opportunity to trade at the closing price after the regular trading session (RTS) and disclosing the order imbalances to other market participants. ETCs exist in the Nasdaq, the SSE STAR, the SZSE ChiNext and the TWSE. To help...