We demonstrate how a machine learning algorithm can be applied to predict and explain modern market microstructure phenomena. We investigate the efficacy of various microstructure measures and show that they continue to provide insights into price dynamics in current complex markets. Some...

We investigate the new reality of exchange-traded funds (ETFs). We show that many ETFs are active investments in form (designed to generate alpha) or function (serve as building blocks of active portfolios). The median ETF has an Activeness Index of 93.1%. Active-in-form ETFs have positive...

Order flow is toxic when it adversely selects market makers, who may be unaware they are providing liquidity at a loss. We present a new procedure to estimate flow toxicity based on volume imbalance and trade intensity (the VPIN toxicity metric). VPIN is updated in volume-time, making it...

The corporate governance problems of banks are qualitatively and quantitatively different from those of other firms. The authors argue that a key factor contributing to this difference is the growing opacity and complexity of bank activities, a trend that has increased the difficulty of managing...

Liquidity occupies a central importance for many areas of finance. But there are very disparate views of liquidity, and correspondingly many different policy implications attached to these views. In this paper, I consider the many faces of liquidity and their implications for financial market...