Over the past 40 years, the volatility of the average stock return has drastically outpaced total market volatility. Thus, idiosyncratic return volatility has dramatically increased. We estimate this increase to be 6% per year. Consistent with an efficient market, this result is mirrored by an...

This paper shows that during episodes of market turmoil, 13F institutional investors with short trading horizons sell their stockholdings to a larger extent than 13F institutional investors with longer trading horizons. This creates price pressure for stocks held mostly by short-horizon...

The underpricing of initial public offerings (IPOs) is generally explained with asymmetric information and risk. We complement these traditional explanations with a new theory where investors worry also about the after-market illiquidity that may result from asymmetric information after the IPO....

This article analyzes the intraday interdependence of order flows and price movements for actively traded NYSE stocks and their Chicago Board Options Exchange (CBOE)-traded options. Stock net trade volume (buyer-initiated volume minus seller-initiated volume) has strong predictive ability for...

The intraday lead-lag relation between returns of the Major Market cash index and returns of the Major Market Index futures and S&P 500 futures is investigated. Empirical results show strong evidence that the futures leads the cash index and weak evidence that the cash index leads the futures....

We examine the intraday relationship between returns and returns volatility in the stock index and stock index futures markets. Our results indicate a strong intermarket dependence in the volatility of the cash and futures returns. Price innovations that originate in either the stock or futures...

This article develops a model of a self-fulfilling credit market freeze and uses it to study alternative governmental responses to such a crisis. We study an economy in which operating firms are interdependent, where their success depends on the ability of other operating firms to obtain...

Many economic agents take corrective actions based on information inferred from market prices of firms' securities. Examples include directors and activists intervening in the management of firms and bank supervisors taking actions to improve the health of financial institutions. We provide an...