Do fast, competitive markets yield liquidity measurement problems when using the popular Monthly Trade and Quote (MTAQ) database? Yes. MTAQ yields distorted measures of spreads, trade location, and price impact compared with the expensive Daily Trade and Quote (DTAQ) database. These problems are...

Are portfolio managers skilled or do they trade too much? Using a marked-to-market based“fair-value” method for measuring fund manager skill, we find that institutional managers canpotentially earn +42 (+33) basis points benchmark-adjusted return before transaction costs aftera holding...

We investigate how the increase in speed of U.S. equity markets has distorted liquidity measures. We find that the widely-used Monthly Trade and Quote (MTAQ) database yields a percent effective spread 43% higher than our benchmark, a quoted spread that is nonpositive nine times more often, and a...

We examine a general class of volatility over volume liquidity proxies as computed from low frequency (daily) data. We start from the Kyle and Obizhaeva (2016) hypothesis of transaction cost invariance to identify a new volatility over volume liquidity proxy “VoV(%Spread)” for percent spread...