Constantinides (1986) finds that transaction cost has only a second order effect on liquidity premia. In this paper, we show that simply incorporating the well-established time-varying return dynamics across trading and nontrading periods generates a first order effect that is much greater than that found by the existing literature and comparable to empirical evidence. Surprisingly, the higher ...

The literature nds that investors increase portfolio turnover following high returns, explaining it by either overcon dence or skilled trading. This paper develops a theoretical model and shows empirically that team-managed funds trade less after good performance than single-managed funds. The magnitude of this di erential increases with team size. Moreover, the change from singleto team-manage...

Automated high-frequency trading has grown tremendously in the past 20 years and is responsible for about half of all trading activities at stock exchanges worldwide. Geography is central to the rise of high-frequency trading due to a market design of ‘‘continuous trading’’ that allows traders to engage in arbitrage based upon informational advantages built into the socio-technical assemblages ...

The 1990 U.S. Clean Air Act Amendments (CAAA) instituted a national program in tradable sulfur dioxide (SO2) emission permits, referred to as “emission allowances,” in the U.S. electricity sector. This paper provides a survey and assessment of the SO2 allowance trading program with a focus on the role of innovation. Over the last decade the cost of compliance has fallen dramatically compared wi...

This paper tries to find a widely accessible measure of liquidity and studies its impact on asset pricing. Using trading turnover as a measure of liquidity and the 19761993 Tokyo Stock Exchange data, I find that, cross-sectionally, stocks with higher turnover tend to have a lower expected return. This evidence is consistent with predictions derived from an Amihud-Mendelson type of transaction c...

Electronically supported transaction processes may lead to efficiency gains and cost reductions enhancing the operational effectiveness. Electronic trade systems improve coordination between buyers and sellers and increase transaction efficiency. The paper shows an exemplary agrifood market with a comparatively high level of inefficiency where electronic trading could benefit participating ente...

Abstract—IaaS clouds invest substantial capital in operating their data centers. Reducing the cost of resource provisioning, is their forever pursuing goal. Computing resource trading among multiple IaaS clouds provide a potential for IaaS clouds to utilize cheaper resources to fulfill their jobs, by exploiting the diversities of different clouds’ workloads and operational costs. In this paper,...

We discuss when and why custom multi-factor risk models are warranted and give source code for computing some risk factors. Pension/mutual funds do not require customization but standardization. However, using standardized risk models in quant trading with much shorter holding horizons is suboptimal: (1) longer horizon risk factors (value, growth, etc.) increase noise trades and trading costs; ...

Electronic trading of equities and other securities makes heavy use of “arrival price” algorithms, that balance the market impact cost of rapid execution against the volatility risk of slow execution. In the standard formulation, mean-variance optimal trading strategies are static: they do not modify the execution speed in response to price motions observed during trading. We show that substant...

Electronic markets use information technology to disseminate information on prices, quantities, and buyer and supplier identities. In spite of the recognized benefits of electronic markets, increased visibility and transparency may introduce imperfections, and create profitable opportunities to bypass markets that generates the information. In the U.S. securities markets, dissemination of marke...