In this paper we (a) quantify equity liquidity using a measure of price impact, the change in a firm's stock price associated with its observed net trading volume; (b) relate the measured price impact to a set of predetermined firm characteristics that serve as proxies for the severity of adverse...

One under-examined cost of trading is illiquidity. This paper measures equity illiquidity as the change in a firm's stock price associated with its observed trading volume. Increasing the magnitude of net turnover during a 5-minute interval by 0.1% of the shares outstanding produces an average...

I show that frequent batch auctions for stocks have the potential to reduce the severity of stock price crashes when they occur. For a given sequence of orders from a continuous electronic limit order book market, matching orders using one second apart batch auctions results in nearly the same...

We combine self-collected historical data from 1867 to 1907 with CRSP data from 1926 to 2012, to examine the risk and return over the past 140 years of one of the most popular mechanical trading strategies - momentum. We find that momentum has earned abnormally high risk-adjusted returns - a...

We study the role mutual funds play in the recovery from fast intraday crashes based on data from the National Stock Exchange of India for a single large stock. During normal times, trading activity and liquidity provision by mutual funds is negligible compared to other traders at around 4% of...

Financial planners typically advise people to shift investments away from stocks and toward bonds as they age. The planners commonly justify this advice in three ways. They argue that stocks are less risky over a young person’s long investment horizon, that stocks are often necessary for young...

An examination of the behavior of stock returns around quarterly earnings announcement dates finds a seasonal pattern: small firms show large positive abnormal returns and a sizable increase in the variability of returns around these dates. Only part of the large abnormal returns can be...

We find support for a negative relation between conditional expected monthly return and conditional variance of monthly return, using a GARCH-M model modified by allowing (i) seasonal patterns in volatility, (ii) positive and negative innovations to returns having different impacts on...