The authors study the joint effect of the trading mechanism and the time at which transactions take place on the behavior of stock returns using data from Japan. The Tokyo Stock Exchange employs a periodic clearing procedure twice a day, at the opening of both the morning and the afternoon...

Merton (1987) proposes that an increase in a firm's investor base increases the firm's value. In Japan, companies can reduce their stock's minimum trading unit-the number of shares in a "round lot"-which facilitates trading in the stock by small investors. We find that a reduction in the minimum...

Merton's recent extension of the capital asset pricing model proposed that asset returns are an increasing function of their beta risk, residual risk, and size, and a decreasing function of the public availability of information about them. Associating the latter with asset liquidity and...

The effects of asset liquidity on expected returns for assets with infinite maturities (stocks) are examined for bonds (Treasury notes and bills with matched maturities of less than six months). The yield to maturity is higher on notes, which have lower liquidity. The yield differential between...

This study examines the behavior of a small stock market with circuit breakers and with a one-hour preauction order imbalance disclosure during the October 1987 crash. The crash and its aftershocks lasted for a week and selling pressure was concentrated in higher beta, larger capitalization, and...

This paper uses a sample of over 25,000 daily warrant prices to empirically investigate potential problems with the commonly used warrant pricing model proposed by F. Black and M. Scholes as an extension of their call option model. One problem seems to be especially important: the constant...

This paper studies the interaction between dealer markets and a relatively new form of exchange, passive crossing networks, where buyers and sellers trade directly with one another. We find that the crossing network is characterized by both positive ('liquidity') and negative ('crowding')...

The higher taxation of dividends in the United States gave rise to theories that explain why companies pay dividends. Tax-based signaling models propose that the higher tax on dividends is a necessary condition to make them informative about companies' values. In Germany, where dividends are not...