We derive invariance relationships in a dynamic, infinite-horizon, equilibrium model of adverse selection with risk-neutral informed traders, noise traders, market makers, and with endogenous information production. The model solution depends on two state variables: stock price and...

We analyze how a large informed trader chooses between a lit exchange and a dark pool. We show that (1) the market share of the dark pool increases when the informed trader trades; (2) the market share of the dark pool increases more when the value of information is higher; and (3) price...

We show that economically insignificant tick sizes encourage undercutting behavior, harming market quality. While theory shows increasing tick sizes in unconstrained markets reduces undercutting, improving market quality, pricing grids of most markets are too coarse to test this. We examine a...

This paper investigates the role of the probability of informed trading (PIN) in mergers and acquisitions. We show that acquirers with higher PINs use more cash to finance their deals due to their higher cost of equity, and acquirers use more equity financing when acquiring targets with higher...

In this paper, we focus on a new generalization of multivariate general compound Hawkes process (MGCHP), which we referred to as the multivariate general compound point process (MGCPP). Namely, we applied a multivariate point process to model the order flow instead of the Hawkes process. Law of...

On 20 April 2020 the West Texas Intermediate (WTI) oil futures price for May delivery turned negative for the first time in history. Other crude prices also posted very low values and their volatility soared, far more than that on stock markets. This article analyses the differences between the...

This paper proposes and tests the private information explanation for the time series of pre-FOMC announcement drift through risk reduction. Using transaction-level data, I document the informed trading is in the same direction of the realized returns in the 24-hour window before FOMC...

This paper examines the finite sample properties of novel theoretical tests that evaluate the presence of: a) Brownian motion, b) jumps; c) finite vs. infinite activity jumps. In allowing for Gaussian, t-distributed, and Gaussian-T mixture noise, our Monte Carlo experiment guides a search for...

This paper examines the price discovery process in a two-tier market, specifically the foreign exchange market. The goal is to identify the sources of private information and to gain insights into the process through which that information influences the market price. Using a transactions...

We propose an actionable calibration procedure for general Quadratic Hawkes models of order book events (market orders, limit orders, cancellations). One of the main features of such models is to encode not only the influence of past events on future events but also, crucially, the influence of...