Institutional ownership affects the sensitivity of stock returns to changes in market liquidity (liquidity risk). Overall, institutional ownership lowers the liquidity risk of stocks. However, different types of institutions affect liquidity risk in opposite ways. Stocks held by hedge funds,...

Using a unique data set of detailed balance sheet information on mutual funds, we find that most mutual funds using derivatives do so to a very limited extent that has little discernable impact on returns. However, there exist two types of funds that make more extensive use of derivatives,...

Using data from the Australian Stock Exchange, the authors assess the information content of an open limit‐order book with a particular focus on the incremental information contained in the limit orders behind the best bid and offer. The authors find that the order book is moderately...

Several recent studies present evidence of investor misreaction in the options market. Although the interpretation of their results is still controversial, the important question of economic significance has not been fully addressed. Here this gap is addressed by formulating regression‐based...

We examine the relation between changes in hedge fund stock holdings and measures of informational efficiency of equity prices derived from transactions data, and find that, on average, increased hedge fund ownership leads to significant improvements in the informational efficiency of equity...

This paper examines mutual fund managers' ability to time market-wide liquidity. Using the CRSP mutual fund database, we find strong evidence that over the 1974–2009 period, mutual fund managers demonstrate the ability to time market liquidity at both the portfolio level and the individual...

We examine in an event-study context what factors affect the relative performance of stocks during liquidity crises. We find that market risk, measured by the market beta, is not a good measure of expected abnormal stock returns on days with liquidity crises. Instead, abnormal stock returns...

One fundamental issue in the study of market microstructures is that of price discovery. While most existing studies focus on the trading period, little is known whether and how much the non-trading period contributes to the price discovery. This paper offers a new perspective on the price...