This paper examines how well the market anticipates regulatory sanction. We look at key dates of SEC, NASD, FTC, Congressional and foreign investigations and their subsequent resolution. Our event study confirms that the settlements provide little new information to the market. In six major case...

We analyze the trading activity in an Internet chat room with approximately 1,300 participants. Traders make posts in real time about their activities. We find these traders are more skilled than retail investors analyzed in other studies. 55% make profits after transaction costs, and they earn...

I examine the effects of Nasdaq's introduction of an anonymous trading facility called SIZE. I compare SIZE to competing ECNs in terms of liquidity and market impact. Despite rapid growth, SIZE has not yet attained a significant market share and rarely influences short-run price evolution. I...

This article reviews the history of the recent shift to electronic trading in equity, foreign ex- change and fixed-income markets. We analyze a new data set: the eSpeed (Cantor Fitzgerald) electronic Treasury network. We contrast the market microstructure of eSpeed with the tradi- tional voice...

The authors estimate the dimension of high-frequency stock-price data using the correlation integral of P. Grassberger and I. Procaccia. The data, even after filtering, appear to be of low dimension. To control for dependence in higher moments, the authors use a new technique known as the method...

This paper considers whether the Plaza Agreement of September 1985 marked the beginning of a fundamental shift in the exchange-rate policy regime for the United States, the former West Germany, and Japan. The paper uses a simple monetary model of the open economy to illustrate how the exchange...

This paper examines maximum likelihood estimation via hill climbing and the expectations maximization (EM) algorithm in the context of Hamilton's Markov switching framework. The techniques are explained in detail and are followed by a discussion of both analytic and computational issues. Both...

There is now considerable evidence that business cycle variation in output and employment in the U.S. differs in expansions and contractions. We present nonparametric evidence that asymmetries are strongest in durable goods manufacturing. In a Markov switching framework, we find two leading...

Option prices seem to behave in ways inconsistent with the Black-Scholes model. Implied volatility varies with the strike price in a parabolic shape that is often called the volatility "smile." My objective in this paper is to identify implied probability distributions that might explain this...

Financial markets embed expectations of central bank policy into asset prices. This paper compares two approaches that extract a probability density of market beliefs. The first is a simulated moments estimator for option volatilities described in Mizrach (2002); the second is a new approach...