Using the introduction of Arrowhead low latency trading platform by Tokyo Stock Exchange as a natural experiment, I analyze the impact of high frequency trading on market quality of J-REITs, in terms of liquidity, volatility, and systemic risks. I also analyze the impact of the 2008 financial...

We present a dynamic equilibrium model to understand differences and interactions between informational and trading speed advantages. The model is a stochastic asynchronous game, with endogenous trading decisions and non-cooperation among agents, in a limit order market. We show that welfare and...

In the literature, there is no consensus on a common approach to measure bond liquidity. This paper is the first to comprehensively compare all commonly employed liquidity measures based on intraday and daily data for the U.S. corporate bond market. We find that high-frequency measures based on...

I examine the impact of the V-shaped disposition effect, which results in uninformed sales when investors realize large gains and losses. Adverse selection risk is reduced in the presence of more uninformed sales. I show in a model that market makers should post tighter bid-ask spreads and quote...

The equity market is more liquid under Democratic than Republican presidencies. This is apparent at the market level but is stronger in small, value stocks and in industries that are more sensitive to Democratic presidents. The effect is robust to different liquidity measures and time periods....

Based on the typical positions of S&P 500 option market makers, we derive a funding illiquidity measure from quoted prices of S&P 500 derivatives. Our measure significantly affects the returns of leveraged managed portfolios; hedge funds with negative exposure to changes in funding illiquidity...

Exchange traded funds (ETF) provide a means for investors to access assets indirectly that may be accessible at a high cost otherwise. I show that liquidity segmentation can explain the tendency for ETFs to trade at a premium to NAV as well as the life-cycle pattern in premiums. ETFs with larger...

We construct a traded funding liquidity measure from stock returns. Guided by a model, we extract the measure as the return spread between two beta-neutral portfolios constructed using stocks with high and low margin, to control for stocks' sensitivities to the aggregate funding shocks. Our...

This paper provides evidence of the effect of algorithmic trading (AT) in the liquidity of the Brazilian equity market. A wide debate on the literature asserts that AT may be both beneficial and harmful to market quality. The results of our econometric estimates for a sample of 47 stocks through...

We document the performance of liquidity proxies in ETFs. Most proxies are developed for use in equities. However, ETFs have lower asymmetric information, more algorithmic trading, and an active primary market where units are frequently created and redeemed. Using a comprehensive database of...