Many market participants invest resources to acquire information about liquidity rather than fundamentals. I show that … agents using such information can reduce the magnitude of short-lived pricing errors by trading against liquidity shocks …. However, the short-run stabilizing effect of this behavior also makes it more difficult to identify liquidity shocks, a signal …

Do competition and incentives offered to designated market makers (DMMs) improve market liquidity? We employ data from … spreads. In particular, market liquidity increases the most for stocks with the largest increase in competition among DMMs …

In a new environment where liquidity providers as well as liquidity consumers act strategically, understanding how … liquidity flows and dries-up is key. In this paper, we propose a dynamic extension of the seminal model of Tauchen and Pitts … in the context of liquidity frictions. In our model, the daily price change and volume processes are represented by a …

show how the distributions evolve and scale over time. Classical theory dictates that if markets are efficient then the …

shocks and attractive liquidity characteristics. These findings are consistent with the idea that the high liquidity of ETFs …

This study shows that to obtain a precise measure of the liquidity premium in the stock market, it is important to … recognize the influence of information uncertainty on the pricing of liquidity. Information uncertainty, which is positively … correlated with stock illiquidity but negatively priced in the stock market, obscures the estimation of the liquidity premium …

By tracking the cumulative inventory position of all passive liquidity providers in the US equity market and matching … each position with its offsetting trade, we construct a measure of profits to liquidity provision (realized profitability … from the realized profits to liquidity provision both in the cross-section and in the time-series. We further show that …

In this paper we survey the theoretical and empirical literatures on market liquidity. We organize both literatures … basic questions within that model. We review the empirical literature through the lens of the theory, using the theory to …