Rational herd behavior and informationally efficient security prices have long been considered to be mutually exclusive but for exceptional cases. In this paper we describe the conditions on the underlying information structure that are necessary and sufficient for informational herding and...

When a company goes public, it is standard practice that the underwriting syndicate allocates more shares than issued. The underwriter thus holds a short position that it commonly fills by aftermarket trading when market prices fall or, when prices rise, by executing the so-called overallotment...

In a dynamic model of financial market trading multiple heterogeneously informed traders choose when to place orders. Better informed traders trade immediately, worse informed delay even though they expect the public expectation to move against them. This behavior causes distinct patterns with...

As equity trading becomes predominantly electronic, is there still value to a traditional, intermediated dealer system? We address this question by comparing the impact of the organization of trading on volume, liquidity, and price efficiency in a quote-driven dealer market and in an...

There are two well-studied timing games in economics: In a War of Attrition, having more predecessors helps; in a Pre-emption Game, more predecessors hurts. This paper introduces and explores a rich new spanning class of timing games with _rank-order payoffs_ that subsumes both timing games as...

type="main" <title type="main">ABSTRACT</title> <p>Facing increased competition over the last decade, many stock exchanges changed their trading fees to maker-taker pricing, an incentive scheme that rewards liquidity suppliers and charges liquidity demanders. Using a change in trading fees on the Toronto Stock Exchange, we...</p>

In a dynamic model of financial market trading multiple heterogeneously informed traders choose when to place orders. Better informed traders trade immediately, worse informed delay – even though they expect the market to move against them. This behavior generates intraday patterns with...

Investment banks legally pursue supposedly price stabilising activities in the aftermarket of IPOs. We model the offering procedure as a signalling game and analyse how the possibility of potentially profitable trading in the aftermarket influences the investment bank's pricing decision. Banks...

While herding has long been suspected to play a role in financial market booms and busts, theoretical analyses have struggled to identify conclusive causes for the effect. Recent theoretical work shows that informational herding is possible in a market with efficient asset prices if information...