When examining information flow into prices, empirical literature usually focusses on direct conduits such as order submissions. Meanwhile, theory suggests that market conditions should have substantial additional effects. Empirical analyses of such effects are methodologically challenging and...

We examine the effect of high frequency trading on market quality from theperspective of a limit order trader. By competing with slower limit order traders, highfrequency traders (HFT) impose a welfare externality by crowding out slower non-HFTlimit orders. The order book imbalance immediately...

We explore the effects of a "tick size war" where European exchanges competed directly on the minimum pricing increment in the limit order book, the tick size. We find exchanges that reduced their tick size immediately captured market shares of quoted and executed volume from exchanges that kept...

In this paper, we show that vector auto-regression (VAR) models, which are commonly used to estimate permanent price impact, are misspecified and can produce conflicting and incorrect inferences when the price impact function is nonlinear. We propose an alternative method to estimate permanent...