Much of the trading activity in Equity markets is directed to brokerage houses. In exchange they provide so-called quot;soft dollarsquot; which basically are amounts spent in quot;researchquot; for identifying profitable trading opportunities. Soft dollars represent about USD 1 out of every USD...

Structural equation models have been around for now a long time. They are intensively used to analyze data from di.erent fields such as psychology, social sciences, economics, management, etc. Their estimation can be performed using standard statistical packages such as LISREL. However, these...

Generalized linear latent variable models (GLLVMs), as defined by Bartholomew and Knott, enable modeling of relationships between manifest and latent variables. They extend structural equation modeling techniques, which are powerful tools in the social sciences. However, because of the...

In this paper we develop a structural equation model with latent variables in an ordinal setting which allows us to test broker-dealer predictive ability of financial market movements. We use a multivariate logit model in a latent factor framework, develop a tractable estimator based on a...