The authors analyze the rationale for limit order trading. Use of limit orders involves two risks: (1) an adverse information event can trigger an undesirable execution, and (2) favorable news can result in a desirable execution not being obtained. On the other hand, a paucity of limit orders...

This paper provides evidence on the economic significance of the predictability in U.S. stock returns using a real-time asset allocation framework. We examine the performance of a Bayesian investor who relies on conditioning information (dividend yield, T-bill yield, default spread, and term...

By comparing execution costs of trades handled by Amex floor brokers with trades entered through its automated post execution reporting (PER) system, this article provides evidence that floor brokers have value. Because they can opportunistically seize liquidity, using a floor broker is...

The capital asset pricing model's (CAPM) primary empirical implication is a positively sloped linear relation between a security's expected rate of return and its relative risk (beta). Recent research indicates that inferences about the risk-return relation are sensitive to the choice of the...