Many recommendations for reforming securities market are predicated on the belief that providing information on order flow and other market variables to traders (i.e., increasing market transparency) will increase liquidity and improve price efficiency. This paper demonstrates that market...

This paper develops a structural model of intraday price formation that embodies both public information shocks and microstructure effects. Due to its structural nature, the model's underlying parameters provide summary measures to assess trading costs, the sources of short-run price volatility,...

Restrictions on transaction price changes are a feature of many security markets. This paper analyzes the impact of such price continuity rules on price dynamics and examines possible rationales for their existence. Contrary to popular belief, continuity rules need not reduce price efficiency,...

This paper examines empirically the role of quot;upstairsquot; and quot;downstairsquot; (batch and continuous) markets in providing liquidity for large-block transactions. Using data on 21,077 large-block transactions in Dow Jones stocks, we find that downstairs markets are a significant source...

We analyze the ability of various market mechanisms to provide liquidity for large equity trades. Using data on 21,077 block transactions in Dow Jones stocks, we find that the 'downstairs' NYSE floor market is a significant source of liquidity. Although negotiation in the informal 'upstairs'...

This paper develops a structural model of intraday price formation that embodies both information shocks and microstructure effects in an internally consistent, unified setting. The model allows us to better understand the observed intra-day patterns in bid-ask spreads, price volatility,...

This paper examines the empirical evidence on the cost of equity trades for institutional investors. There is considerable practical and academic interest in the measurement and analysis of trading costs. We discuss some of the results that emerge from the recent literature on institutional...

Exchange seats are capital assets that confer access to the trading floor. As such, their prices reflect expectations about future activity and returns for the market as a whole. For this reason, the process by which seat prices are determined provides valuable information about beliefs of...

This paper develops a model of the upstairs market where order size, beliefs, and prices are determined endogenously. We test the model's predictions using unique data for 5,625 equity trades during 1985-1992 that are known to be upstairs transactions and are identified as either buyer-or...

We examine the magnitude and determinants of execution costs associated with institutional equity trades and their effect on investment performance. Using detailed information on over $83 billion of recent equity transactions by 21 institutions, we analyze the major components of execution...