It has been argued in the literature that emergency liquidity injections should be conducted preferably in the form of open market operations. As we show in the present paper, this is not necessarily the case when liquidity may be alternatively used for speculative purposes during the crisis. In...

Modern equity markets have both fast traders such as dealers, market makers, and high frequency traders and slow traders such as retail clients. We model and show empirically that latency differences allow fast liquidity suppliers to pick off slow liquidity demanders at prices inferior to the...

Market integrity, market efficiency, and market accuracy are related, but distinctly different concepts which are often misunderstood or misused in public policy debates, especially with regard to corporate takeovers and corporate governance issues. This paper discusses the differences in these...

We analyze how changes in government policy affect stock prices. Our general equilibrium model features uncertainty about government policy and a government whose decisions have both economic and non-economic motives. The model makes numerous empirical predictions. Stock prices should fall at...

This article analyzes the manifold situations in which the efficient-market hypothesis (EMH) has influenced — or has failed to influence — federal securities regulation and state corporate law, and the prospective roles for the EMH in these contexts. In federal securities regulation, the EMH...

This research examines the relationship between firm-specific liquidity and both information asymmetry and divergence of opinion, within the context of different trading system (i.e. floor versus electronic), for UK, Swiss and German stock markets. By using both univariate and multivariate...

In this paper, we explore how competition among stock exchanges, operated as self-regulatory organizations (SROs), affects the design of their members' surveillance. We develop a model where two for-profit SROs compete for trading volume, while brokers execute transactions on behalf of the...

We present comprehensive evidence in support of giving liquidity equal standing to size, value/growth, and momentum as investment styles, as defined by Sharpe (1992). First, we show that financial market liquidity, as identified by stock turnover, is an economically significant indicator of...