We analyze a nonlinear rational expectations equilibrium model with an ex post endogenous liquidity provision decision. Speed and information technology advantages allow endogenous liquidity providers (ELPs) to switch between limit and market orders after observing private information. This...

The development of asset pricing models that rely on instrumental variables together with the increased availability of easily-accessible economic time-series have renewed interest in predicting security returns. Evaluating the significance of these new research findings, however, is no easy...

A dynamic model of strategic trading with two asymmetrically informed traders is analyzed where one informed trader knows the information seen by both informed traders, and the other informed trader only knows his private information. While the first informed trader is better informed, the...

Following Lence and Hayes (1994a), we study the problem faced by an Iowa farmer who wishes to hedge a soybean harvest using Chicago futures contracts. A time-series model for spot and futures prices is postulated, and numerical Bayesian procedures are used to calculate predictive densities and...

This paper investigates whether customer order flow conveys information about future foreign exchange (FX) prices. We use a unique data set from a leading Australian commercial bank that records every FX trade made by the bank in the spot Australian dollar/US dollar market between 2005 and 2010....

This paper studies the performance of the Foster-Whiteman (1999) procedure for using a Bayesian predictive distribution for the future price of an asset to compute the price of a European option on that asset. A technical contribution of the paper is the description of a sequential importance...