We analyze trading behavior and information acquisition in a competitive rational expectations model in which different information signals get reflected in value at different points in time (in the short-term and in the long-term). If investors are sufficiently risk averse, we obtain a unique...

This paper examines ex ante effects of quot;circuit breakersquot; (mandated trading halts). We show that circuit breakers, by causing agents to suhoptimally advance trades in time, may have the perverse effect of increasing price variability and exacerbating price movements. We next consider a...

We study informed trading around announcements of merger bids (M&AD) and quarterly earnings (EAD). Extending the EKOP (1996) approach, we compute the daily posterior probabilities of informed trading on good and bad news. We find evidence of informed trading before and after M&AD and EAD. A...

We propose that the volatility of order flow is a proxy for costs of information asymmetry, as order flow volatility varies positively with parameters that also influence adverse selection costs of trading. Empirically, order flow volatility is significantly higher prior to earnings or merger...

We examine the notion that financial products which cater to investors' behavioral biases can attain popularity and yield substantial profits for issuers. Our setting considers options with a callback feature, namely, callable bull/bear contracts (CBBCs). These contracts have high skewness when...

We explore the optimal timing of voluntary disclosures by firms. By delaying disclosure of a signal, firms encourage the acquisition of correlated signals by reducing informed investors' exposure to the long-term risk of holding the asset. Immediate disclosure reduces rents from acquiring the...

This paper studies the dynamics of high-frequency market efficiency measures. We provide evidence that these measures co-move across stocks and with each other, suggesting the existence of a systematic market efficiency component. In vector autoregressions, we show that shocks to funding...

We decompose the structural estimate of the probability of informed trading, PIN, into components that capture informed trading on good and on bad news. We estimate these two components at quarterly intervals, and provide new evidence that they capture informed trading around earnings...

Following previous research which established that liquidity commonality exists within one stock market over a short period of time, this paper finds that liquidity commonality also exists globally. Utilising a large number of stock exchanges and a twelve year research time frame, this paper...

We examine whether values of equity options traded on individual firms are sensitive to the firm's capital structure. Specifically, we estimate the compound option (CO) model, which views equity as an option on the firm. Compared to the Black-Scholes (BS) model, the CO model reduces pricing...